Retirement Account Balances

Three fourths of Americans aged 50 to 64 face bleak futures with a mean savings of $26,395 for retirement. A general rule of thumb is that you need 20 times your income in savings to maintain your standard of living in retirement.  401(k) plans have been a failure.

Update (February 18, 2013):  Michael Fletcher reports on a Center for Retirement Research study that estimates 53 percent of Americans age 30 and above are at risk of being unprepared for retirement.  In 2001, only 38 percent were at risk.

Update (March 25, 2013):  Edward Siedle says millions of elderly Americans will slip into poverty due to the retirement crisis.  Pensions have become a thing of the past.

Also, a chart from Doug Short shows a pretty clear trend in workforce participation--perhaps retirement itself is about to become a thing of the past.

Update (April 4, 2013):  Why we need to abolish the 401(k).

Update (April 26, 2013):  Amid calls to cut Social Security, an argument in favor of expanding it.

Update (June 22, 2013):  The National Institute on Retirement Security released a report indicating that the crisis is worse than previously portrayed with the "typical" working age household having only about $3000 in retirement savings.

Update (July 16, 2013):  A report from the Employee Benefit Research Institute suggests that under certain circumstances a 401(k) plan provides more retirement income than traditional private sector pension plans. The study is a survey of workers who may or may not be contributing to a 401(k) they are eligible for.  But those who seem to do the best are those who pay in for 30 to 40 years and those with higher incomes.

Update (August 6, 2013):  Helaine Olen calls do-it-yourself retirement plans fraud.

Update (September 3, 2013):  The Economic Policy Institute charts retirement savings trends and concludes that 401(k) plans have created a few big winners and many losers.  Percentiles below 50 are not shown because half of workers have no retirement savings.

Update (September 6, 2013):  A report from the IRS shows that fewer workers are saving money in retirement accounts and the amount saved is also decreasing.  Two-thirds of workers saved nothing (seven-eighths among those in their twenties).

Update (September 24, 2013):  Lynn Stuart Parramore reports on the EPI's Retirement Inequality Chartbook referred to above.

Update (October 2, 2013):  HR 2374 is supported by the financial industry to replace "fiduciary" standards with "suitability" standards for consulting advice.

Update (October 31, 2013):  In response the the 401(k) disaster, blogger Duncan Black (Atrios) pushes to expand Social Security.

Update (November 19, 2013):  The anti-pension movement is not popular.

Update (November 22, 2013):  Paul Krugman also supports expanding Social Security to address the retirement crisis.

Update (December 15, 2013):  Michael Lind, co-author of the April New America Foundation report arguing to expand Social Security, claims that the discussion has shifted from "how much to cut" to "whether to cut or expand" Social Security thanks to people like Senator Elizabeth Warren.

Update (January 7, 2014):  Paul Buchheit explains four ways in which American retirement is worse off than it needs to be.

1. Federal Tax Avoidance is the Biggest Threat to Social Security
2. State Tax Avoidance Defunds Pensions
3. Corporations Play One Underfunded State Against Another
4. Banks Take a Big Chunk of Our Retirement Accounts

Update (January 10, 2014):  Steve Rosenfeld reports on the need to expand Social Security.

Update (March 3, 2014):  More from Paul Buchheit about the retirement crisis.

Update (March 18, 2014):  An Employee Benefit Research Institute survey reports confidence in having enough money for retirement is up, but only among those with higher incomes.  The grim news is that over one-third of workers have saved $1000 or less for retirement.

Update (April 13, 2014):  Josh Boak and Paul Wiseman explain how the fees on 401(k) accounts reduce savings by significant amounts.  You might need to work an extra three years to compensate.

Update (May 7, 2014):  With home values down, more people are taking early withdrawals from their 401(k) plans when they need extra cash.  The median savings are now $24,400 overall and $65,300 for those age 55 or above.  The early withdrawals will likely make the retirement crisis even worse.

Update (May 10, 2014):  An excerpt from James Russell's book Social Insecurity:  401(k)s and the Retirement Crisis.

Update (August 12, 2014):  A Federal Reserve survey reports that 31 percent of Americans have no retirement savings.  That includes 19 percent of those age 55 to 64.

Update (September 13, 2014):  The retirement crisis and the student loan crisis are starting to converge for a few people according to a U.S. Government Accountability Office study.

Update (November 7, 2014):  A study by the Center for Economic and Policy Research shows that the wealth of the middle quintile of those age 55 to 64 has been declining since 2004.

Update (January 3, 2015):  An excerpt from the book Falling Short: The Coming Retirement Crisis and What to Do About It describes three options--save more, work longer, live on less in retirement.

Update (February 27, 2015):  Pensions get more expensive as retirees live longer than expected.

Update (June 5, 2015):  An analysis by the U.S. Government Accountability Office finds that 52 percent of households age 55 and older have no retirement savings.  A good reason to expand Social Security.

Update (October 29, 2015):  A report from the Institute for Policy Studies and the Center for Effective Government gives a stark contrast. The top 100 CEOs have as much retirement savings as the bottom 41 percent of Americans. That's about $50,000,000 per CEO and about $100 per family.

Update (March 5, 2016):  A report from the Economic Policy Institute explains how retirement inequality has grown as 401(k)s have replaced pensions.

For many groups—lower-income, black, Hispanic, non-college-educated, and unmarried Americans—the typical working-age family or individual has no savings at all in retirement accounts, and for those that do have savings, the median balances in retirement accounts are very low.

Update (April 10, 2016):  Transamerica has an annual retirement survey. Retirement savings by age group:

People in their 20s have a median retirement savings of $16,000.
For people in their 30s it's $45,000.
For people in their 40s it's $63,000.
For people in their 50s it's $117,000.
For people in their 60s it's $172,000.

Update (May 11, 2016):  A U.S. Government Accountability Office report finds that the prevalence of 401(k) plans (defined contribution or DC) contributes to greater inequality.

Update (March 18, 2018):  Keith Spencer talks to younger adults who are deliberately not saving for retirement because they don't see much of a future for capitalism.

Many millennials expressed to me their interest in creating self-sustaining communities as their only hope for survival in old age; a lack of faith that capitalism as we know it would exist by retirement age; and that alternating climate crises, concentrations of wealth, and privatization of social welfare programs would doom their chance at survival.

Update (January 30, 2019):  Representative John Larson has a plan to expand Social Security. Meanwhile, Senate Republicans want to eliminate the estate tax. Priorities.

Update (June 15, 2019):  Retirement savings gaps around the world will leave many people outliving their plans.