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Busted Boomers: Why Their 401(k) Plans Are in Ruins

Written by Gary North on December 21, 2011

The problem is getting attention, but this Wall Street Journal story caught my attention.

TheĀ  median household headed by a person aged 60 to 62 with a 401(k) account has less than one-quarter of what is needed in that account to maintain its standard of living in retirement, according to data compiled by the Federal Reserve and analyzed by the Center for Retirement Research at Boston College for The Wall Street Journal. Even counting Social Security and any pensions or other savings, most 401(k) participants appear to have insufficient savings. Data from other sources also show big gaps between savings and what people need, and the financial crisis has made things worse.

This analysis uses estimates of 401(k) balances from the end of 2010 and of salaries from 2009. It assumes people need 85% of their working income after they retire in order to maintain their standard of living, a common yardstick.

So, what will they do? Stay in the work force? Statistics indicate that about half will delay early retirement.

They will retire. Then they will get trapped.

The government and employers aren’t going to pay more for people’s retirements. Unless people begin saving earlier and contributing more to their 401(k) plans, advisers say, they are destined to hit retirement age with too little money.

They will lose their skills. They will lose their contacts in the employment world.

There comes a time to face facts, but most boomers are unwilling to do this.

Their children had better be ready to take them into their homes. But neither the parents nor the children are ready for this.

The solution is not additional savings. Time has just about run out for the boomers. The solution is getting a good post-retirement career. That’s what I did. I became self-employed, so I can’t be fired! But not many boomers are ready to hear this.

Continue Reading on online.wsj.com

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11 thoughts on “Busted Boomers: Why Their 401(k) Plans Are in Ruins

  1. I'm worried that the stock market will be busted, and the 401(k)s will become worthless or much diminished in value. Is the answer for those in their 40s and 50s to put more $ into these funds? I'd venture not, but obviously, since paper money is not wealth, neither putting it (savings, such as I might have) under the mattress of much help either. What to do?

  2. Oh yeah. Well, not every so called Baby Boomer lived 'high on the hog.' I would be one of those who lived WITHIN my means and often living with in ones means…actually in real time can make all the difference! Or am I an idiot and do not know of what I write?

  3. Sadly, this is true. My parents were very secretive about their finances and their provisions in the will. Unfortunately, when they died, they had convinced my disabled brother that I would "throw them all out on the street" if I could. However, what actually happened is that I didn't get a chance to financially plan for caring for my brother and now am saddled with tax payments to keep a roof over his head while he's crossing his fingers that he'll have enough money to afford the heating oil this winter. And, yes, it has severely cut into my own donations into my IRA. So, there's not enough for health care and there's not enough for retirement. I'll probably be working up to the day that I die.

  4. I have a different take on this. I have had 3 different 401k plans in 2 decades and THEY DO NOT WORK. They were a stupid idea when they were invented, and they are stupid now. WE NEED PENSIONS BACK FOR EVERYBODY. If your company is profiting from your labor, THEY OWE YOU A SHARE OF THAT. Your paycheck represents the labor that keeps the business from going under. Your pension reflects your share of the profit. I have never seen a 401k that made anybody any money at all unless you constantly manipulate it in and out of different funds.

    Eat this, Warren : I average 35 to 45% GAIN every year in my plan. Some years I average over 150% gain, especially one year that I cashed it out, enjoyed the money to my heart's content while retiring some debt, and started over again. (I left my employer and came back one month later). The first 3 years I earned "x" dollars. When I left and came back, I earned more than 2"x" dollars. I have more than double now than I did during the first 3 years I worked there.

    Every "retirement target date" plan is a sick joke.
    None of them make any money and I am fed up with the money managers lame excuses as to why.
    WHY HAVEN'T YOU MADE ME MORE THAN 10% IN OVER 10 YEARS???????
    They blame everything from fradulent "global warming" to war to 9/11 to Y2K to you name it.
    I think most of these people should be fired, they are stealing fees from us and raping our accounts.

    But this is the bottom line : If you are not averaging gains of 30% or more every year for at least 30 years, you are
    GUARANTEED NOT TO HAVE ENOUGH MONEY TO RETIRE.

    Point and match.

  5. the baby boomers not saving enough=no changes in social programs=bancrupt america

  6. toosmarttovoteGOP says:

    Back in the day, when employers had retirement plans, this was much less of a problem. Just another perk of Reaganomics.

  7. TheThinMan says:

    401K's are a dead end. you are more apt to be putting money into a sinkhole than a retirement plan. The last two jobs I held, I had a 401K – I lost ALL of the money that the 1st company matched me with – meaning when I got smart and dumped the 401 – I might as well have put the money under the mattress. The second company – I tried to diversify and be smarter – unfortunately health problems terminated that job – and I again just got out of the 401 – again – with practically zero gain at all ($95), whoopee! The stock market is a game played by rich people and the government – it is not a game for the average citizen. Winning the lottery is almost as good a gamble, or just putting the money in a credit union savings account.

  8. What if they gave a party and nobody came? Yes, Small Business is like that. You come up with new ways to produce income but, it takes 8 to 15 thousand dollars to get into a certain line of [put your favorite idea here] and nobody has the money to go along with it, to buy it, to learn it. After about four tries, you have to go into the survival mode.

    You can't come up with a good business on the Titanic while it is sinking when the crew is taking everything that floats away from you.

  9. What if they gave a party and nobody came? Yes, Small Business is like that. You come up with new ways to produce income but, it takes 8 to 15 thousand dollars to get into a certain line of [put your favorite idea here] and nobody has the money to go along with it, to buy it, to learn it. After about four tries, you have to go into the survival mode.

  10. Troublemaker says:

    everybody taking all of it away from us and our elected ones are allowing it with their palms extended. my pension was frozen on 1/08 for a 401k two months later the ceo of this 9 billion dollar corporation got a one million nine hundred and eighty three thousand share bone-us, aprox 109 million u.s dollars.havent heard from him since. the blue collar worker is getting screwed from all sides and what started it all was NAFTA and the entire u.s congress is laughing all the way to the bank

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    And it’s most likely get something 2014 ira limits out of 16.
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