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60% Of 401(k) Participants Accumulated More Debt Than Retirement Savings
The average 401(k) and other defined contribution (DC) plan participant now defers over 8% of their annual income toward retirement savings through their plan and social security taxes, making it one of the largest expenses for households. However, as HelloWallet found, retirement readiness remains stubbornly low: the typical worker near retirement only has about 2 years of replacement income saved, or about 15 years short of the median lifespan post-retirement.
One explanation for the stubbornly low retirement readiness of workers may be an increase in household debt. With more household income going to pay off debt, households may have less money to save and face higher costs of living in retirement. In fact, over 60% of workers accumulated more debt than they contributed to retirement savings between 2010 and 2011.
The study, which analyzed consumer finance data from the Federal Reserve and the U.S. Census Bureau, underscores the need for retirement plan sponsors to provide participants with holistic, independent financial guidance. Without that support, increases in 401(k) and other DC account balances will be off-set by growing liabilities on the other side of a participant's ledger.
The research finds that 20% of participants in 401(k) retirement programs added more credit card debt to their family balance sheet than they contributed to retirement savings. Other findings in the research include:
- Monthly debt payments for households near retirement increased by 69% between 1992 and 2010, now totaling $.22 for every $1.00 earned by DC plan participants near retirement.
- DC participants who accumulate debt faster than retirement savings have 50% less of their annual income saved for retirement compared to DC participants who contribute more to their retirement funds than they accumulate in debt.
- Most DC participants who accumulate debt faster than retirement savings are over 40 years old, college educated, earn over $50,000, and have insufficient emergency savings.
"Through retirement plans and social security taxes, the average 401(k) participant now contributes over 11 percent of their paycheck to retirement savings every month, yet the typical worker near retirement has only about 2 years of replacement income saved," said HelloWallet founder and CEO Matt Fellowes, a former Brookings Scholar who led the study. "The growth in household debt is one big reason why retirement readiness is so stubbornly low."
"While there is no question about the fundamental value and importance of the 401(k), our research finds that it is just one piece of the puzzle," said Fellowes. "Until we work on improving all components of retirement readiness, it will be very hard for employers to fundamentally move the needle."
While US companies invest $118 billion annually in 401(k) programs for their employees, and retirement savings is now one of the largest budget line items for US households, HelloWallet's new research suggests that these investments are not always producing the intended outcomes. In many cases, better holistic financial guidance could provide employees with the knowledge necessary to crawl out of their debt deficit and steadily build a secure retirement.
To receive a complete copy of the study, click here.
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making it one of the largest expenses for households.
What... you're forgetting about rent, food, transport and medical expenses? One of the largest... ain't even in the top 4.
And who cares about 401ks... Your 401k won't save you when the petrodollar implodes, or Bondzilla shows up or when the government decides to seize it or when the stock market bubble goes boom or the dollar goes kaboom due to infinity QE or when Fukushima go full scale meltdown.
Long guns, ammo, food, water, hazmat suit. Short civilization.
Bitcoin ATM
http://www.wired.com/dangerroom/2013/10/spy-rocks/?cid=co13611354
Stay Liquid My Friends
Lottery ticket sales are up, that was the gotta have hope plan from the beginning at 25 years, and 30 years later they still have hope, but the situation hasn't changed.
Yup.
Should call it 401(s) with the S standing for SUCKER!
I heart my 401k. I would starve in lieu of not maxing out the $17,500. Where is the mandate we must permanently hold bonds, US equities? My plan just added a brokerage feature which is becoming more common. We should spend more time talking strategies verses pessimistic hyperbole. My only fear is the govt will seize 401k's @ some point.
So... oil producing countries will NEVER drop the US dollar? The stock market bubble will NEVER blow up? The bond market will NEVER revolt? QE is good economic policy? And there's no chance Fukushima will go into meltdown??
Dude, just because you believe something won't happen doesn't mean it won't... especially when you're against HISTORY.
You can count on the seizure, it will come, second, most 401k / IRA providers just talk about nominal dollars and not real dollars.
And then there are the fees.
Had I known as much about what was going on back when I started participating in the late 80's I wouldn't have done it. Anyone who talks about the 'free' money misses the point that it's not technically yours until you withdraw it. Look at the fine print about that, it's the IRS' up until that point.
Would have been better to pay the taxes then and keep control of it to myself and not have to worry now about WHEN CONgress will seize it 'because they have to.'
>>We should spend more time talking strategies verses pessimistic hyperbole. My only fear is the govt will seize 401k's @ some point.<<
Read your own typed text until your own wisdom sinks into your own head.
The IMF Proposes A 10% Supertax On All Eurozone Household Savings
http://www.theautomaticearth.com/Finance/the-imf-proposes-a-10-supertax-...
Thanks for posting this. It is quite alarming.
"My only fear is the govt will seize 401k's @ some point."
Poland confiscated private pension funds.
Your fear is well founded. Government debt is 17 trillion and rising. What is happening in other countries, is in some form or fashion going to happen here as well. The only question is what form it will take and to what degree when we get there.
no down payment, 6 months free, all the unicorns and titty sprinkles you can eat, BUY, BUY, BUY
Titty sprinkles where ? those are my favorite.
done well,
you'll never be able to stop
Let them eat IOUs
8 hours 23 min, howdie
pull a chaise, relax, get out your popcorn..........there's no finer spectacle than debt porn
Howdie back at ya, Lurked for years....decided to get in the game
nice, is your name francis by chance??
Nope.....and if it was, I'd punch my mother!
or VD,
but that's another story
This is when I accuse you of being an NSA plant. Actually, let me drink some more first. I'll be back.
They don't pay enough...
keyboard grease, always makes it sing, nice call on the NSA plant, how say you Nube?
This is just your friendly NSA algo here, nothing to see here move along move along...Algos are used on Weekend nights, since real NSA plants are 6 inches deep in hookers.
you've passed step one of the 12 step program, good luck, heavy drinking will ensue
Horay, Horay I'm a offically Tendernube. I feel like Navin Johnson
http://www.youtube.com/watch?v=kOTDn2A7hcY
Hey Obama! I didnt build this debt!
false standard of living......you may not have built it but you might of benefitted just a tinge.....this is the extreme ponzi makeover show, right??
Re: Hey Obama! I didnt build this debt!
No, your parents did. It started with Johnson and never stopped.
The only thing better than spending free money is spending other people's money.
He's on track to owning 1/2 of it and in all likelihood responsible for an unprecedented collapse and loss of our reserve currency. Not bad for a Marxist community organizer and considering it took well over 200 years for the first ten trillion.
Isn't that the example the government has set?
Re; Isn't that the example the government has set?
It's been a debt bases society for 60+ years now. When entire generations of people know that NOTHING bad will happen if you live right on the edge of solvency then that becomes the normal.
Just as Management ripping off stockholders is normal, part-time work is normal, no benefits is normal, and a society that would rather piss on you than help you is normal.
Survival of the fittest sucks unless you're one of the fit ones.
Death Panels will take care of this problem. You will know your expiration date. Everyone else will know as well when your palm glows red.
401K the SCAM , yeah nice plans for Companies to roll out bitchezz. Keep dreaming
TPTB convinced the sheep that they could save for their own retirement in lieu of pensions that involve pools of money where everyone pays in like insurance (the guy who dies at 65 doesn't collect, so his money goes to the pool). To save enough to retire comfortably and live to 100 which some people do, you have to put away millions AND figure out how to do it in a way that it won't be lost to inflation, fraud, confiscation, etc.
never put dime one into a stock market based retirement plan, bought houses instead, and to be honest I'm not even that smart
I tried shorting this heroin Fed market. At least I still have some booze money left.
you can have my second best Don Cherry rookie card, it's the only thing of value in my shoe box made of paper
"TPTB convinced the sheep that they could save for their own retirement in lieu of pensions that involve pools of money where everyone pays in like insurance (the guy who dies at 65 doesn't collect, so his money goes to the pool)."
Pensions sound all well and good until an economic depression hits, and pension funds go bankrupt as the stock market crashes. Nothing moves in a straight line and pensions are no exception to the rule. What pension does a worker at Kodak get now? What is happening to government pensions?
"To save enough to retire comfortably and live to 100 which some people do, you have to put away millions AND figure out how to do it in a way that it won't be lost to inflation, fraud, confiscation, etc."
What do you thnk a pension fund has to do? So why would you expect a pension fund to succeed over time, when an individual cannot.
Evybodi iz relyin on da gubermint soshul sekuritar....
You're not allowed to criticize the S.S. even around these parts. Boomers tend to get upset. Nevermind that over-reliance on social security has for decades contributed to underwhelming savings.
It looks that way. I fully expect that by the time I'm ready to collect (in another 20 years or so) there will be nothing left. I have prepared accordingly. I doubt many others have.
Easier plan. Collect aluminum cans and such till you die. Live off the urban landscape.
I heard those Goldman boys drink lots of Pepsi.
Over.
This is an Amerikan disaster so absolute, so all-encompassing the Amerikan mind cannot wrap around it.
We will look forward to slowly and steadily declining standards for the rest of our lives.
Unless you lay plans now, in twenty years max you will que for sustenance until you can no longer drag yourself into line.
You can already see the old-timers dragging their palsied bodies along the roads, onto the trains and buses to work. The miserable faces. Working away and gaining nothing.
For the very great number, there will be no food or medical care outside Der Stadt. Complete control and 1984 on the way.
Not one in 10,000 can see what is coming. Slaveship U.S.A., her flag is unfurled, there she is in the distance.
"This is an Amerikan disaster so absolute, so all-encompassing the Amerikan mind cannot wrap around it."
By dint of the importance of the U.S.A., we are faced with world catastrophe, not limited to the borders of this country. Ultimately we must "wrap our minds" around it because our survival and prosperity depend on it. America can lead in this.
"Unless you lay plans now..."
Individual plans are fine and necessary as long as everyone understands that there are no individual paths to guarantee safety. We are in this together. We will win as humans have won before--with action and solidarity.
"Not one in 10,000 can see what is coming."
If that is true, then it is all the more important that those 10,000 display patience and keep a positive attitude to the millions who must catch up as fast as events permit.
Debt Serfdom 101
it's Big Gulp Size Now !
yep, someone has be in debt to originate FRNs...wonderful system we have here isn't it.
With icomes falling for many workers, the first place they cut back is on their 401K contribution. My jobs offered no 401K, I did finally get one, but it was a "no matching funds" plan. I think I am not alone. Not everybody works for a large profitable corporation. I think it is an illusion to assume most Americans have a 401K.
Good points. In fact, even some of the "large profitable corporations" are decreasing or even ending their employee contribution match. That is certainly true of the Nielsen Company (television ratings monopoly).I refused to participate in that plan when I worked there. But non-participation is usually not a practical option for the worker with the average understanding of financial planning.
Aside from outrageous hidden fees and questionable allocations to conventional market unicorns, 401(k) plans have become just another way that working people are trapped into participating in their own financial diminishment.
Only a FOOL puts money into a 401; either it will be stolen and replaced with .gov debt, or you'll see whatever meager SS you get stripped from you because you have 'other assets' this you get no SS.
Only a fool relies only a 401k but limited options for the non uber rich to shettler $$ from the tax man. Most 401ks are okay but exepnsive for what they are but a bad choice... usually
If I have a good year I can put big $ in a SEP IRA but there still is a cap and if income up and down you can't make up for lean years.
Yea dude, yea.
You really thing the rules cannot, and will not, change over night? You need to wake up and smell the 8 O'clock bean; whent the time comes the easy money will be confiscated first...and it ain't no easier than the 401Ks/IRAs.
My concern is what if I have one million dollars saved when I retire but a barrel of oil cost one hundred thousand dollars. I sure as fuck won't be driving to visit my grand kids I guess. Eh fuckit I drink alone!
Perhaps a wise man would have 200K in gold 100K in silver 500K in farmable land, 100K in guns, gear, and food, and 100K in cash?
You know, diversify?
doesn't mean shit if you can't run 4 hours in the dark over rough terrain carrying a child (or two)
it's all about what level you're prepared to hedge too!
Who needs a million?
I'll turn 60 this year and have been single all my life, so no excess baggage, like kids, wife, etc.
No debt. House, free and clear, on one acre, more than enough land to grow 70% of my food needs (I've bought only meat, coffee and condiments since May this year). Have an internet business that more or less runs itself (ad revenue), so my "retirement" income will keep coming, .gov or no .gov.
Got an old car, some silver, couple of guns, live in the country. I figure unless I get some incurable disease - in which case I'll die anyhow - I should be able to live out my golden years peacefully without much dough. Working on passive solar and wind to defray utility costs, currently my largest monthly expense.
Even if my business went bust, I would still be able to eat and survive. As for savings, I see little point in holding excess capital in anything other than productive resources (machinery, tools, car, etc.).
People are fucking tools.
Savings... 1% interest, check. USD/JPY, -50%, check... vacation home investment, under water (literally), check...
It's the New Math...
Home equity loans during the housing bubble.
And people buying into the REIC's propaganda by buying overpriced, deteriorating shitbox mcmansions, that they cannot afford.
"While US companies invest $118 billion annually in 401(k) programs for their employees, and retirement savings is now one of the largest budget line items for US households, HelloWallet's new research suggests that these investments are not always producing the intended outcomes."
The stock market has been crashed twice. Add in Wall Street fraud. Add in Wall Street fees. What have you got left?
These investments are producing the intended outcome for Wall Street.
Basically, you borrow money at high interest in order to invest it in low yield instruments.
WHAT'S THE FUCKING POINT OF THAT??
Are you kidding? Somebody's getting rich off that! The point is FUCKING the little guy.