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401(k) breaches undermining retirement security for millions


By zzyzzx   Follow   Mon, 14 Jan 2013, 11:42pm PST   1,412 views   31 comments   Watch (1)   Share   Quote   Permalink   Like (1)   Dislike (1)  

http://www.washingtonpost.com/business/economy/401k-breaches-undermining-retirement-security-for-millions/2013/01/14/f54a0e90-5e70-11e2-8acb-ab5cb77e95c8_story.html

A large and growing share of American workers are tapping their retirement savings accounts for non-retirement needs, raising broad questions about the effectiveness of one of the most important savings vehicles for old age.

More than one in four American workers with 401(k) and other retirement savings accounts use them to pay current expenses, new data show. The withdrawals, cash-outs and loans drain nearly a quarter of the $293 billion that workers and employers deposit into the accounts each year, undermining already shaky retirement security for millions of Americans.

“What you have is 401(k) participants voting with their wallets saying they would much rather use this money for other purposes.

Overall, about a third of American households participate in 401(k)-type accounts, which hold a combined $3.5 trillion in assets. But a large portion of that money does not make it to retirement. A recent study by Boston College’s Center for Retirement Research found that the typical household approaching retirement age has an average of $120,000 in retirement savings, enough for roughly a $7,000-a-year annuity.

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Ironman   befriend   ignore   Tue, 15 Jan 2013, 12:00am PST   Share   Quote   Like (1)   Dislike (2)     Comment 1

zzyzzx says

More than one in four American workers with 401(k) and other retirement savings accounts use them to pay current expenses, new data show. The withdrawals, cash-outs and loans drain nearly a quarter of the $293 billion that workers and employers deposit into the accounts each year, undermining already shaky retirement security for millions of Americans.

Yep, we are in an economic recovery.... Obama said so!!!

FORWARD!!!!

Mr Happygoluckofus   befriend   ignore   Tue, 15 Jan 2013, 12:30am PST   Share   Quote   Like (1)   Dislike (1)     Comment 2

Then as if pulling from their 401K isn't detrimental to quality of retirement they'll afford. The Government then gives you another Fuckyou very much, by penalizing you, for taking your own freaking money, thus money from the bank's CEO personal change purse.

People should be in charge of their own future. That includes retirement and health. Both of these sectors would be much healthier if Marge from HR wasn't the sole decider of how and were you get both.

The one and only possitive thing I "HOPE" will come from Obamacare, will be. People wont be tethered to a company they despise and loathe, just because of the "bennies"(Which they over pay for) like Health insurance because they've got chronic ailment that keeps them there.

Companies will really have to sweeten the pot, like providing healthcare for the whole family with out any premiums or out of pocket expenses.

You know like you'd expect from an insurance that you are already paying for.

Peter P   befriend   ignore   Tue, 15 Jan 2013, 12:40am PST   Share   Quote   Like   Dislike     Comment 3

I fully expect to tap my 401K before retirement. I will probably withdraw before the boomers retire en masse.

mell   befriend   ignore   Tue, 15 Jan 2013, 1:06am PST   Share   Quote   Like (1)   Dislike     Comment 4

Peter P says

I fully expect to tap my 401K before retirement. I will probably withdraw before the boomers retire en masse.

It could be advantageous that way (even with the penalty) if you project continuously rising taxes.

gbenson   befriend   ignore   Tue, 15 Jan 2013, 2:37am PST   Share   Quote   Like (2)   Dislike     Comment 5

Everyone I know who is near to, or has reached, retirement age, HATES their 401k because they were told if they contributed they'd earn a healthy return and retire comfortably.

The reality is that many of them were utterly raped by the markets and have had to go back to work.

Peter P   befriend   ignore   Tue, 15 Jan 2013, 2:58am PST   Share   Quote   Like   Dislike     Comment 6

mell says

Peter P says

I fully expect to tap my 401K before retirement. I will probably withdraw before the boomers retire en masse.

It could be advantageous that way (even with the penalty) if you project continuously rising taxes.

Also there can be new restrictions. Besides, they can find a way to nationalize private retirement accounts.

Do we even technically "own" those accounts?

Ironman   befriend   ignore   Tue, 15 Jan 2013, 3:00am PST   Share   Quote   Like   Dislike (2)     Comment 7

Peter P says

Also there can be new restrictions. Besides, they can find a way to nationalize private retirement accounts.

Do we even technically "own" those accounts?

Maybe you should withdraw it all out now before "they" do...

ducsingle5313   befriend   ignore   Tue, 15 Jan 2013, 3:03am PST   Share   Quote   Like   Dislike     Comment 8

The typical household approaching retirement age has an average of $120,000 in retirement savings? I've read other articles that the average Baby Boomer only has $30k in retirement savings.

lostand confused   befriend   ignore   Tue, 15 Jan 2013, 3:14am PST   Share   Quote   Like   Dislike     Comment 9

gbenson says

Everyone I know who is near to, or has reached, retirement age, HATES their 401k because they were told if they contributed they'd earn a healthy return and retire comfortably.


The reality is that many of them were utterly raped by the markets and have had to go back to work.

Sad but true. I remember that Enron lady who had a million dollar worth of Enron stock in her account-she was not allowed to sell it, but the executives were and she lost eveyrthing.

finehoe   befriend   ignore   Tue, 15 Jan 2013, 3:16am PST   Share   Quote   Like (1)   Dislike     Comment 10

ducsingle5313 says

The typical household approaching retirement age has an average of $120,000 in retirement savings? I've read other articles that the average Baby Boomer only has $30k in retirement savings.

Either way, it's not enough to live on.

errc   befriend   ignore   Tue, 15 Jan 2013, 3:30am PST   Share   Quote   Like   Dislike     Comment 11

gbenson says

Everyone I know who is near to, or has reached, retirement age, HATES their 401k because they were told if they contributed they'd earn a healthy return and retire comfortably.

The reality is that many of them were utterly raped by the markets and have had to go back to work.

This is just the beginning. Wait till the word gets out, and none of us younger folk bother to participate. Then who will the sell to?

Peter P   befriend   ignore   Tue, 15 Jan 2013, 3:37am PST   Share   Quote   Like (1)   Dislike     Comment 12

Call it Crazy says

Peter P says

Also there can be new restrictions. Besides, they can find a way to nationalize private retirement accounts.

Do we even technically "own" those accounts?

Maybe you should withdraw it all out now before "they" do...

Tempting...

Mine is all in government bonds. Perhaps it will drop after stocks do.

It is more tax efficient to withdraw in a low AGI year.

Kevin   befriend   ignore   Tue, 15 Jan 2013, 2:24pm PST   Share   Quote   Like (1)   Dislike     Comment 13

If you are in your 50s and your 401k allocation was less than 75% bonds, your fund manager was grossly negligent (or, more likely, you ignored their guidelines and decided to gamble instead).

If you're only 40, though, worrying about your 401k balance is idiotic. You aren't even halfway through your prime working years.

I don't know why anybody would take an early withdrawal from their 401k. A loan, sure, but unless you're getting a 100% match, the penalty isn't worth it.

Kevin   befriend   ignore   Tue, 15 Jan 2013, 2:27pm PST   Share   Quote   Like   Dislike     Comment 14

finehoe says

ducsingle5313 says

The typical household approaching retirement age has an average of $120,000 in retirement savings? I've read other articles that the average Baby Boomer only has $30k in retirement savings.

Either way, it's not enough to live on.

120k is more than enough to live on if you own your home outright. A 3% annual return (bond interest or safe stock dividends alone will pay more) will cover you.

$30k wont, but I doubt many people have that. More likely its 50% of people have zero and 20% have over $100k, skewing the average way up.

Peter P   befriend   ignore   Tue, 15 Jan 2013, 2:28pm PST   Share   Quote   Like (1)   Dislike     Comment 15

Of course I did it for the match and the AGI reduction.

EBGuy   befriend   ignore   Tue, 15 Jan 2013, 2:37pm PST   Share   Quote   Like (1)   Dislike     Comment 16

Kevin says: 120k is more than enough to live on if you own your home outright. A 3% annual return (bond interest or safe stock dividends alone will pay more) will cover you.
I think you may be off by an order of magnitude. Perhaps you mean $1.2 million? At 3% this gives you $36k per year.

Peter P   befriend   ignore   Tue, 15 Jan 2013, 2:44pm PST   Share   Quote   Like (1)   Dislike     Comment 17

120K is enough? Did you mean 120K ounces of gold?

Alas, the only amount enough is MORE.

Enough means you want no more. More is always better.

Ceffer   befriend   ignore   Tue, 15 Jan 2013, 3:00pm PST   Share   Quote   Like (2)   Dislike     Comment 18

The 401k breaches are by the OWNERS of the accounts, themselves.

Are we now in an era where SELF victimization and foolish planning calls for pity and rants against any identifiable third party?

This is where self pity rationalizing becomes detached from all forms of responsibility and reality.

Hey, where's all my 401K money? Duh, I spent it and paid massive taxes and penalties on it. If you didn't spend the money, you would still have it, and a lot more, to take it out at retirement with no penalties, double Duh.

But there still must be somebody to blame, where are they? I'm going to sue them!

Kevin   befriend   ignore   Tue, 15 Jan 2013, 4:28pm PST   Share   Quote   Like   Dislike     Comment 19

EBGuy says

Kevin says: 120k is more than enough to live on if you own your home outright. A 3% annual return (bond interest or safe stock dividends alone will pay more) will cover you.

I think you may be off by an order of magnitude. Perhaps you mean $1.2 million? At 3% this gives you $36k per year.

Nope, I was actually referring to the ~12 years that people live after retirement. 3% would let you stretch your $120k for about that long, providing about $15k/year (plus SSI). This is more than enough for somebody without a mortgage payment.

Peter P says

120K is enough? Did you mean 120K ounces of gold?

Alas, the only amount enough is MORE.

Enough means you want no more. More is always better.

You are a sad person.

Ceffer says

Are we now in an era where SELF victimization and foolish planning calls for pity and rants against any identifiable third party?

I wouldn't go that far, but I do think that fund managers should be giving better advice and realistic projections for retirement. Not having funds in stocks when you're old, not having bonds when you're young, etc.

The guidelines that vanguard provides me for my 401k are laughably bad, and I'm a college educated professional. I can only imagine how confused some food service worker must be.

Moving away from pensions as a retirement model may prove to be the biggest collective financial disaster in our history. The majority of the baby boomers are going to retire with nothing, and will wind up putting pressure on social security to pay more.

Ceffer   befriend   ignore   Tue, 15 Jan 2013, 6:40pm PST   Share   Quote   Like   Dislike     Comment 20

Vanguard usually recommends a 60/40 stock/bond split, even if you are older, on the presumption that you may still be in the stock market for another 20-30 years.

Inflation protected securities are boring, but provide a reasonably consistent 7.2 percent over time, and some insurance against inflation. However, they don't provide the casino like thrill when the stock market surges.

zzyzzx   befriend   ignore   Tue, 15 Jan 2013, 10:17pm PST   Share   Quote   Like   Dislike     Comment 21

Kevin says

Nope, I was actually referring to the ~12 years that people live after retirement. 3% would let you stretch your $120k for about that long, providing about $15k/year (plus SSI). This is more than enough for somebody without a mortgage payment.

Oh, you mean it's enough if you draw down your principle. IMO not a good idea, unless you like the idea of a 50% chance of outliving your assets and assume no real inflation.

errc   befriend   ignore   Tue, 15 Jan 2013, 10:56pm PST   Share   Quote   Like (1)   Dislike     Comment 22

I can only imagine how confused some food service worker must be.

Not nearly as confused as you seem to be about the reality of the world you live in, to think that food service workers have 401ks

Entering retirement with a house paid off free and clear, and 120k in savings, won't allow for much "living", unless you reside in somewhere with the absolute lowest cost of living in the country

You assume this allows for 15k of disposable income per year (considering that your SS check will cover your property tax and insurance, your car insurance, and your supplemental health insurance and the littany of drug copays). That leaves 40$ per day to live off of. I guess you can eat road kill and dumpster dive for spoiled hot dogs and stale bread, or just eat soiled cardboard. But if you don't have access to these things in walking distance in your old age, gas will eat into your 40 quickly. Let's hope there's no car repairs, or worse yet, house repairs. Then there's kittly litter and cat food, the cable bill, your utilities for heat and AC and keeping the lights on. Nevermind, there's no point in explaining this to someone so dense,,,carry on in your fantasy world and blame republicans

Kevin   befriend   ignore   Wed, 16 Jan 2013, 12:16am PST   Share   Quote   Like   Dislike     Comment 23

Ssi + $15k per year is more than the median household income. It is beyond adequate. I know several retirees getting by just fine on less.

Yes, food service workers have 401ks. Some even get a nice employer match.

errc   befriend   ignore   Wed, 16 Jan 2013, 12:56am PST   Share   Quote   Like (1)   Dislike     Comment 24

Maximum monthly SS draw is 2500
Average monthly SS draw is 1200

so I agree, if you are ok with counting on dieing ass broke by your 78th birthday, you can live on a 120k 401k with a house paid off free and clear, and your social security check, so long as nothing unexpected happens. But you better be healthy and content with staring at your dining room wall and eating expired pb n j and dented can goods from the discount grocer, and live in a low cost of living area. But it certainly isn't the golden years of retirement that eneration was told that retirement would be

Peter P   befriend   ignore   Wed, 16 Jan 2013, 1:39am PST   Share   Quote   Like (1)   Dislike     Comment 25

Kevin says

Ssi + $15k per year is more than the median household income. It is beyond adequate. I know several retirees getting by just fine on less.

Yes, food service workers have 401ks. Some even get a nice employer match.

What's the point of retirement if you can't take back to back cruises with a butler?

Kevin   befriend   ignore   Wed, 16 Jan 2013, 1:57am PST   Share   Quote   Like   Dislike     Comment 26

errc says

Maximum monthly SS draw is 2500

Average monthly SS draw is 1200

so I agree, if you are ok with counting on dieing ass broke by your 78th birthday, you can live on a 120k 401k with a house paid off free and clear, and your social security check, so long as nothing unexpected happens. But you better be healthy and content with staring at your dining room wall and eating expired pb n j and dented can goods from the discount grocer, and live in a low cost of living area. But it certainly isn't the golden years of retirement that eneration was told that retirement would be

You have no idea what things actually cost, do you?

Exclusive of housing, I support a wife and 4 children with a budget of $5000 a month. I save everything else. We live extremely well, in a high cost of living city. Half of that $5000 is for things that I won't need when my kids are grown.

When I was single, my total income was under $30k for years and I lived just fine -- including housing payments!

$20-30k a year is more than enough for a single / retiree couple to live on happily. Yes, including travel and recreation. The proof is the millions of retirees living on less.

The only people who get to spend their retirement in luxury are the people who spent their working lives in luxury.

There's nothing wrong with dying broke, either. You know you can't take it with you, right?

finehoe   befriend   ignore   Wed, 16 Jan 2013, 2:05am PST   Share   Quote   Like (1)   Dislike     Comment 27

Kevin says

There's nothing wrong with dying broke, either. You know you can't take it with you, right?

Not a problem if you know when you're going to die. Otherwise...

Peter P   befriend   ignore   Wed, 16 Jan 2013, 2:14am PST   Share   Quote   Like   Dislike     Comment 28

Perhaps Logan should not have run.

dublin hillz   befriend   ignore   Wed, 16 Jan 2013, 6:19am PST   Share   Quote   Like   Dislike     Comment 29

Kevin says

The only people who get to spend their retirement in luxury are the people
who spent their working lives in luxury.

It is perhaps possible to live way under your means while you are working, save/invest a bunch of money and generate great return and then cash in during retirement and then increase your standard of living. But it seems like a bad gamble to trade your best years for this potential payoff when you are way older and presumably have less energy to live life to the fullest.

Kevin   befriend   ignore   Wed, 16 Jan 2013, 6:54am PST   Share   Quote   Like   Dislike     Comment 30

dublin hillz says

Kevin says

The only people who get to spend their retirement in luxury are the people

who spent their working lives in luxury.

It is perhaps possible to live way under your means while you are working, save/invest a bunch of money and generate great return and then cash in during retirement and then increase your standard of living. But it seems like a bad gamble to trade your best years for this potential payoff when you are way older and presumably have less energy to live life to the fullest.

Exactly.

I max out my 401k and get a 50% match, but I save the rest of myoney for fun things like vacations and a nice house.

thunderlips11   befriend   ignore   Wed, 16 Jan 2013, 6:57am PST   Share   Quote   Like   Dislike     Comment 31

The solution is to increase wages, or allow for inflation.

The 1987-2007 idea of keeping wages flat but allowing easy credit backed by rapid rises in the stock market and/or real estate market failed.

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