The Average American Contributed $2,733 To Their 401(k) In 2012

Tyler Durden's picture

One of the headline grabbing stories making the rounds today was that the average 401(k) balance, as reported by Fidelity, rose by 12% to an all time high of $77,300 in 2012 from $69,000 the year before. Considering that Bernanke, as well as the entire developed world, have now made it clear they will not stop pumping money into the market until they generate enough inflation that the world's $30+ trillion in excess debt (as calculated by BCG) can be safely inflated away, one wonders just how many months of living expenses said cash would fund, but one thing is certain: the assumption that one's entire retirement can be prefunded with some $77K is disturbing. The obligatory spin: this nubmer was a laughable $48,900 in 2008, so at least there is improvement. Green shoots perhaps?

There are nuances to the data: for workers aged 55 and over, the average 401(k) balance is $143,300, while those workers 55 and over who have been lucky to continuously contributed their 401(k) for at least 10 years have an average balance of some $243,800. Too bad the people who fall into the latter category are a handful of the entire universe. The other question, of course, is what do the tens of millions who do not have a 401(k) plan to do when they retire: the Fidelity study only accounted for some 12 million plan participants who have an account with the pension giant.

Furthermore, while it is commendable that Bernanke has generated a wealth effect of some 12% for those few who are planning for retirement, another problem is where the funding for this increase has come from. As Bloomberg explains, while two thirds of the increase came courtesy of the stock market, or some 8% in absolute terms, the rest was from funded (and matched) contributions to accounts. This is equal to $2733 in actual money set aside for retirement in 2012, a far cry from the maximum allowed $17,500 per year, with the actual cash outflow excluding the corporate match substantially less. This amount to a measly $228 per month (less net of matching) that the average American who has a 401(k), has set aside for retirement. We understand now why Bernanke is so hell bent on hitting that Dow 36,000 bogey - without it, the average retired American will wake up very soon one day and realize that the money is gone. All gone.

Some additional details on the breakdown:

Among older workers, 401(k) contribution rates averaged 11.4% for workers aged 65 to 69, 10.6% for those aged 60 to 64, and 10% for those aged 55 to 59. If you add in their employer match, the average savings rate for each of those groups was: 14.9%, 14.2% and 13.6%, respectively, according to Fidelity.


Workers aged 35 to 39 saved 7.2% on average (10.4% with the employer match). Those aged 40 to 44 saved 7.6% (10.9% with the match). Those aged 45 to 49 saved 8% on average (11.4% with the match). Those aged 50 to 54 saved 9.2% on average (12.7% with match).

Which means that once again it is the younger workers who are in for a very rude awakening:

Contribution rates are substantially lower among younger savers. Workers aged 20 to 24 saved 5.4% of their salary on average, those aged 25 to 29 saved 5.9%, and those aged 30 to 34 saved 6.5%. With the employer match included, those figures jump to 8.1%, 9.1% and 9.7%.

There is of course alternative, and it is well-known to those who have been following our series on the increasing gerontocracy of the American work force:

For a growing portion of people, their retirement plan is to work longer. A separate study found that 62% of workers aged 45 to 60 plan to delay retirement. That’s up from 42% in 2010, according to a survey of 15,000 people by the Conference Board, a nonprofit business-research organization

But.... but... the media spin is that the labor force is imploding because of all the millions of baby boomers who can't wait to retire. Does not compute. Must be seasonally adjusted or something.

As for the conclusion:

“You get some people who are more predisposed to saving,” said Beth McHugh, vice president of market insights at Fidelity. “Those are the individuals that we repeatedly see they will take advantage of any and all opportunities for saving.”

Considering the soaring amount of emergency 401(k) withdrawals in the past few years, the word "saving" can soon be scrapped from the US lexicon. But at least it clears up any confusion over the dreaded possibility that the Fed may, one day, begin unwinding its balance sheet which will be $4 trillion by the end of 2013, and then increase by $1 trillion every year until, well, it can't increase any more.

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Shizzmoney's picture

If you can't spot the sucker at the poker table........

.......then he's probably running your retirement account.

strannick's picture

While those above average uber Americans intead bought silver

Fleecer's picture

more quick math:

say that avg 55-65 category person with $243,800 (age 60 avg), suddenly wakes up and becomes an uber-conservative saver (stick with me)... and maxxes-out this 401k the next 5 years AND does full catchup contrib (AND assume that max increases $500/yr and catchup incr $200/yr... ) AND they earn 7% (no, really) in the mkt on avg AND they retire at 65 AND only take 4% out per year from this staggering huge (sarc) nestegg of $481,717... that's A WHOPPING $19,268.66 pretax to add to their SS check. 

Whaddaya bet they still have a mortgage too.... and finance cars they can't afford...

donsluck's picture

You could have skipped to your last sentence. The key to retirement is lack of debt. You can live just fine on $19,268.66 a month and still save that SS check for a rainy day.

Fleecer's picture

sure... but it's $19k per YEAR

OH, and I'm sure inflation isn't going to be a factor at all... I mean, Benny says printing trillions doesn't cause inflation. 


BandGap's picture

I beleive other countries have raided these accounts to meet needs (Romania?).

Eally Ucked's picture

Yeah, everybody waits for your print out put!

icanhasbailout's picture

Yup, that's $2733 they will never see again once the government wants it.


It's amazing how much people will pay for the fiction that they'll be able to retire. I need me a scam like that.

SheepDog-One's picture

I bet most all of these .401k contributions were basically employee arm twisting by corporate employers.

I know that's the case with my aunt, over Christmas she said she's worried about having money in these markets and wants out of her 401k but her employer 'frowns' on it.

kliguy38's picture

That's a couple a grand too much........

Buckaroo Banzai's picture

Yep. Finally, the average American is showing some common sense. I will be surprised if the nation's 401k's don't get seized before the end of 2013. I'll be SHOCKED if they don't get seized before the end of 2014.

SilverIsKing's picture

I don't contribute anymore because I think what's in there will be gone.  I'm missing out on the match but that's just a mirage to begin with.

Only way to get the money is to leave the job.  Considering it.

Meat Hammer's picture

Having to quit your job to get your money.  Wrap your head around that one.

Sorynn's picture

My company outsourced Accounting and Finance.  Much more of the backoffice work, including legal support is on its ways overseas.  I was able to secure a small severance, and I was able to take my 401k cash with the tax hit.  That currency may go many places, but not back into the ponzi.  

Freddie's picture

Hope & Change.  A lot of baby boomers and seniors voted for this.  Nice job.

Kreditanstalt's picture

Again, why does the Fed EVER have to "unwind its balance sheet"?

Tell me why.

Cdad's picture

Why?  The reason WILL BE...inflation.  But of course, by then, it will be too late to stop that particular economic problem.  Which is why the FED SHOULD BE unwinding right now.

You asked...

Kreditanstalt's picture

Really?  They never need to mark anything to market.  They can literally PRINT "money".  There is no price inflation because the printing of money and funnelling of it directly to the banking sector has taken the place of the fractional reserve process as a money generating mechanism.  It's safely esconced in "excess reserves" anyway: velocity ZERO.

The Fed can even hide price inflation - IF the miserable remnants of the productive private economy ever become strong enough to ever generate any...  And their balance sheet can continue expanding quite literally forever. 

I predict that they'll never "unwind" their balance sheet...

Shell Game's picture

Statist bodies dangling from D.C. trees and lamposts will unwind the Fed balance sheet...

donsluck's picture

I am of the same mind Ms K. A lot of these analysts carry their argument to that point and stop. If the Fed balance sheet continually expands, you would eventually run out of financial "products" to buy. The problem becomes organic. Nothing can expand infinetly. Wait, maybe it can. After all, the evidence now is that the universe will constantly expand.

insidious's picture

Kreditanstalt, I think you used to be known by another handle (which my aging mind can't quite recall) - judging by your icon (and comments). How is your investment portfolio these days? How are you positioned and how is it working out for you?

Whiteshadowmovement's picture

Dont underestimate the baby boomers guys, this last leg of the ponzi will be their gift to themselves, dont expect it to disappear before them

Lost Wages's picture

We stopped my wife's 401K contributions last year (because I half expect someone to steal it) and I am currently selling off all her stock funds and putting the money in the closest thing to cash her 401K plan has, the "managed income portfolio" (because I think a crash is coming in the next few months). We'll see how much of it we end up with in the end....

Whiteshadowmovement's picture

Excuse my ignorance here but I am just wondering, are you able to select whatever equities you want in your wife's 401k or is it limited to preconceived portfolios and funds etc.?

edb5s's picture

Most 401(k) plans include only a set list of mutual funds to choose from (unless you are offered company stock).  These lists are usually dominated by proprietary funds of the 401(k) provider (i.e. if your plan is through Fidelity, you're looking at a lot of Fidelity funds as choices).  


I only put 4% into mine solely to get my employer's match.  Mine is about 50% cash and 50% Vanguard Short-Term Investment Grade fund.  I figure putting my 4% at risk of being confiscated by gov't or forced into t-bills is worth it for the match (plus my employer puts in 10% annually which vests over an extended period, couldn't be had w/o my contributions).   

Whiteshadowmovement's picture

gotcha thanks that was a succinct and comprehensive answer. I had heard something to this effect in most cases and always wondered whether this varies from employer to employer or if this is the standard throughout the industry.

fonzannoon's picture

Whiteshadow that was an accurate answer someone gave you regarding fund selection. To give you some perspective....I am in NY and I tend to see two types of boomers retire. The non federal worker. He/she usually has somewhere between 200k-500k in their 401(k), They are usually good for approx 20k in Social Security. The first question I get asked is "how much income can I expect from this money without taking stock market risk". My answer is usually (for 300k) 9k/yr. They look at me like I am fuckin nuts. They say "well if I put it in half stocks and half bonds how much can I expect?" I answer 12k/yr.  We pretty much accept that they will end up going through their principal and will most likely bust out at the most inopportune time in their lives. This is assuming a long term care scenario does not wipe them out first.

The second type is the 53yr old federal worker. He/she is usually retiring with a 6 figure pension. In a lot of cases that pension qualified for total disability even though they just ran a marathon. Also they have free healthcare for life. They also have 300k and could care less if I bought them lotto tickets as my financial plan because they are moving to Florida and that is their fuck you money anyway.

Maybe 1 in 10 boomers has some sort of corporate pension that bridges the gap with their SS and 12k off their 300k but that is rare and I see less and less of it every day.


Whiteshadowmovement's picture

Fascinating fonz, thanks a lot for that perspective. What do they end up doing then- fixed income or 50/50 ot do they end up risking it? I assume from the context of your answer that most just take the 4% and assume most of its going to run out. 

Do your Federal retirees do a lot better than your non-Federal due to the fact that they are happy allowing you to take risks?

Also what usually happens to their home equity? Do you ever get asked to deal with something like that? I would imagine it varies vastly from case to case, but one would assume if they realize they will run out of money, are they making any plans to refinance or just sell up and buy a condo on a golf estate or something?

Dr. Engali's picture

"Which means that once again it is the younger workers who are in for a very rude awakening"

Seems like somebody I know made this same statement on this topic about
an hour ago. You mentioned that you didn't know where I was going in my first point .... There have been various trial balloons sent up by our cash strapped government that they would take over people's 401ks and IRAs. In exchange the government would give them lifetime payments. If the participant died the money would go to the Feds not to their heirs.

Whiteshadowmovement's picture

Yeah doc, thanks because I thought the way you phrased it you were talking about taxes or something so I couldnt quite put it together.

That seems to be the way its going, though to me it sounds like it would be easier to simply increase social security and make sure the rest get perhaps 8% annual appreciation if they are exposed to equities (of course this depends from fund to fund obviously, which was why I was very curious to hear what the level of selection actually is, and it doesnt sound like it encourage variety in the least).

Dr. Engali's picture

Yeah but from a cash strapped government point of view they have another vehicle to cram bonds down,approximately 19 trillions worth, and the beauty is the feds get to keep it when the ex-owner dies.

Whiteshadowmovement's picture

That is a very interesting sort of scenario to play out in your mind, I mean technically they could step in to fill the void fonz was just talking about in terms of the 5-6% annuities that were driven out of the game.

Dr. Engali's picture

That would be okay if it was just in my mind. However the legislation has been proposed on more than one occasion.

Whiteshadowmovement's picture

When you really give it some thought it would work on a lot of levels, not necessarily to the degree that it would surpass equities as an asset class for retirees, but as a good '3rd' leg sort of option to ease them out of bonds. Personally, I think assuming that the markets continue on this centrally planned path, investors will eventually make the great rotation and the Fed will be there to make sure the yield stays where its supposed to as they absorb these bonds coming onto the market, yet it is a bit presumptuous to expect people to go 100% equities right off the bat. Though I think with a decent rally this year, and a huge one next year, they would be pretty close.

If you go back and check out that article I referenced in USA today to illustrate the debate in the popular media is quite interesting because the (obviously liberal) author jumps to the unequivocal conclusion that this is all a matter of social security stepping up to provide a safety net for the failed 401k system. It would be interesting to really see this discussed on a grander scale, have there actually been any political support for the idea as of yet?

fonzannoon's picture


Why not tank the market, blame a bunch of rich guys, and offer to move all 401(k) balances into a government back guaranteed income account?

Whiteshadowmovement's picture

Why tank the market? Its in our (tptb) interest to keep it going and make sure there is no risk of the economy shutting down. Youve worked so long and so hard to sucker people back in, whats the point of throwing it all away? Unless of course it would be necessary to protect the dollar in some way, as the dollar is the one thing which must be preserved at all costs, so Im sure they would sacrifice the market to protect the dollar but I dont see the necessity of it.

The real question is how to ease people out of bonds? Yields dont matter, the Fed will buy as many as it takes.

So attractive equities are one part of the equation, the idea of a sort of gov. "working man" bond (doesnt that sound great) yielding like 5-6%, guaranteed yields for yet to retire 401k workers to protect them from low bond yields. Its just a nice way to bridge the gap so they dont take too big of a hit from face value on the real bonds going down. As soon as they retire and cash in their 401k's they could then sell the "worker" bonds at market rates- very close to the 10-year obviously, and pocket the spread and stick that into equities (or keep the bonds yielding 5-6%, we can bump it up to 6.5% if they wanna go in on a 30-yr). It would also be a nice cushion for the system. Who cares, they can write the shit off anyway, the way we are discussing this scenario its about fighting deflation (ie how to counter the drain from retirees drawing down their savings). 

fonzannoon's picture

I think there are a few things to consider. First, I truly believe we are transforming into a Russia type Scenario. If government really wants to control the market (as well as everything else), well then just go for the power grab and take the money, and I think they will.

I also think that the games being played eventually ( I know I know) can lead to a currency crisis. Whenever that day comes they will choose to save the dollar and the tank of all tanks comes along and there is the excuse for the power grab if that was part of the plan.

I the demographics come into play. The 50 plus crowd are the only ones left with any money. The 4 year olds are paying for their parents and kids and the 30 and below crowd are comletely screwed. The 50 plus crowd will be draining their accounts over the next 20 years to sustain themselves and support their broke ass kids. That is a tough thing to combat.

Whiteshadowmovement's picture

Fonz I think you have it totally backwards:

"If government really wants to control the market (as well as everything else), well then just go for the power grab and take the money, and I think they will."

Its the opposite, they are controlling the market now (no need to reiterate) through psychology, then reason they need to do that is to keep confidence in the system, not because they want the money. They have the money already, its in the shadow banking system already, the question is do they get to keep it that way. its tough for tptb to set it up for themselves any sweeter than they have it now. A local Cantillon effect where every dollar that gets printed goes into the banking system first and is then maybe or maybe not released into M2. Then a global Cantillon effect where the US profits from making everyone elses reserve currency.
They dont want to fuck this up on either the global or local scale.

You imagine it far too primitively, you must extend your imagination beyomd just the soviet experiment with central planning. Hitler took more or less took full control of the economy as well but didnt close down the stock market. He also monetized much of his state spending of the books:

He was given credit for the same reason the dollar is there, because his creditors (in the US case, the entire world) believed he would be good for it so long as he could militarily push his weight around.

There are all kinds of outcomes for central planning...

And the demographic challenge if anything is a massive deflationary challenge. I wish I could find it but I recall there was an article here on ZH long ago about how the Fed expects P/E ratios to eventually compress to 7-8x from the effects of the baby boomers drawing down.

What keeps Bernanke up at night isnt Zimbabwe, its Japan

fonzannoon's picture

I truly do understand where you are coming from. I think you absolutely miss the mark of the mindset of the people here. I think you take the clients you deal with and extrapolate their psychology to the people here. You have complete and total faith in this grand experiment and have little worries that it will fail.

Retail is not coming back. You can make the case that the market does not need them. I can't say whether the market does or does not. I did not think it would go on this long with these no volume ramps day after day. I have no idea how ZH has the intestinal fortitude to keep reporting it. I am in the business and I lost interest a long time ago.

But at that point it's not about some experiment anymore. It's just a bunch of bullshit.  It's an elite power grab, and money grab. Which I am pretty much convinced that it is. Everyone sees this as a gimmick.  Even people with a fraction of your understanding of things see a sidewalk Atlantic city magic trick at best.

Whiteshadowmovement's picture

To be honest fonz, I think the mindset of the people here is they have nothing left to lose so bring it on, though I dont think theyd like how it would go when push came to shove, but at the moment they cant see how it could be any worse for them. Theres sort of a general boomer doomer undercurrent here as Carlin put it "they're staring down the barell of middle age burnout, and they dont like it" and Im sure some people here would have been happy to see the Mayan prophesy come true and finally see the world destroyed, because if they cant live forever, theyll at least take down the system before they go.

It aint gonna happen. Its not that I put such extensive confidence in the central planners themselves, its simply that Ive sized up their opposition and there is no single group, old or young that is willing to risk anything for a new system.

It really is the Decembrist revolution of 1825.

Where Im not exactly with you anymore is the elite power/money grab. They have been consolidating their control over the past 30+ years building up the system to the point it is now. What more can they possibly get in terms of power/money that they dont already have. In my mind its all about maintaining the status quo, why in the world risk tanks in the streets? Seriously, for what that they dont already have?

Usually, revolutions or power grabs etc occur by definition when one group is out of power and takes it from another. You are talking about the guys that are well and truly in power and who have engineered a world ascendancy of finance and made themselves the new nobility in effect, throwing it all away to crash their own system (you are saying theyd tank their own markets, not an exogenous group of Revolutionary people doing it to them), and for what?

fonzannoon's picture

I just believe the system is broken. The social security etc. funds are almost tapped out. as well as so many other entities. that 19 trillion or whatever would make a nice temporary infusion of capital to keep paying those ponzi's. i'm not saying i am resolute in this theory. I don't know to what extent qe's can be redirected to spray money at all different holes in the dam. 

i am pretty sure you will go with the digital money route as the answer to a lot of this. i don't have a built in argument against it because it has not been something i have spent a lot of time on. 

I also don't subscribe to the idea that the only alternative has to be chaos and mad max. But maybe it is. I don't really know.

Whiteshadowmovement's picture

Dude, always good talking but i gotta run. Remind me tomorrow to tell you the story of my favorite client...

Vashta Nerada's picture

I gave you a thumbs up for honesty and accuracy, fonzanoon, though that is the most depressing thing I have read all day, and that is indeed saying something.

Seasmoke's picture

you speak the truth the question, is how to end those fraudulent public pensions

otto skorzeny's picture

they'll extract it from you-at gunpoint

fonzannoon's picture

A few years ago their used to be annuity vehicles that guaranteed 5-6% withdrawal features. I absolutely hated them because they fee the shit out of people. But I did lock some people into them (with a portion of their assets) becuase I started realizing how bad it would get with rates. They have ended up being a blessing which will end up being a curse. Those life insurance companies that offered them have since raised their fees, cut off additions and have offered to try to buy some clients out. The next step is one of them will go belly up and fail to pay the benefits. Zirp will make it an eventual certainty. Like everything else in life when you are retail it's heads they win tails you lose.

As for what happens today? Today clients say "well do what you think is best". They usually go the mix of stocks/bonds route and access the dividends as they pay out. To your point, rates going down while stocks have gone up a limited extent, helped with the extend and pretend game. It has absolutely helped some people keep their balances in tact while they draw down. But more often than not I get phone calls from people asking to take a few extra distributions throughout the year and the writing is on the wall.

Like I said I am in NY so I do get plenty of the happy go luck federal retirees which help my business while at the same time causing me to pay 12k/yr and rising property taxes and $1,300 in healthcare permiums to fund their damn pensions and healthcare. It's like they are patting me on the head while kicking me in the balls.

Whiteshadowmovement's picture

fonz where do you think the line is?  If you told them they could expect an 8% return in equities (hypothetically) with minimal risk, would most of them convert to 100% equities? Would that be enough $24k +$20k from SS for them to make their bottom line (assuming constant dollars of course for the sake of argument)?

funny about the Federal workers being both a curse and a blessing for you. 

fonzannoon's picture

If I told anyone they could expect an 8% return in equities with minimal risk most of them would go for it. The first 5% correction (should it ever come) they would pull their money and sue the shit out of me. I would lose in arbitration and lose my licenses and that would be it.

I don't mean to skirt your question. I know it is theoretical, but it is a non starter because I could never do that.

The funny thing is the Pimco total return bond fund was up what....10% last year? So people have come to expect the total returns from bonds and the income from their stocks.

Whiteshadowmovement's picture

Really interesting discussion, because in a way this goes right to the heart of the psychological aspect on which I predicate my outlook of the Fed's near term success. 

Again, just for the sake of argument, lets just assume the markets do 8% this year and 10% next year, meanwhile bonds are flat. That doesnt necessarily mean PIMCO wont make money, but one imagines it will certainly shift to the equities side in terms of total return. What do you expect them to do- would they begin the great rotation as has often predicted (even if you havent promised them 8% outright?)

fonzannoon's picture

It's two battles being fought. You have the one person who is hanging by a thread already. So while I would expect them to extend out on the risk spectrum a bit, and it would help them somewhat...they are the ones with employment issues and fighting inflation and they are exhausting their assets in spite of the rising market.

The second person who has the cushion of a pension etc. was already in the market to begin with, so they get an extra pop.

Winners and losers man, and in a lot of cases the losers are footing some of the bill the winners are enjoying. That is why the social fabric continues to tear.