Retiring Baby Boomers' 401(k) Plans Come Up Short

The Wall Street Journal:

The 401(k) generation is beginning to retire, and it isn't a pretty sight.

The retirement savings plans that many baby boomers thought would see them through old age are falling short in many cases.

Read the whole story: The Wall Street Journal

Comments

[Hussein Abdulrasul]

12:41 AM on 02/25/2011

Things have changed for the better here folks with the recent bull market of early 2011 when the S&P 500 Index is already up more than 10%, people's 401k accounts are bigger. However, participation rates have slipped, mainly because many people are still out of work & thus not contributing to their 401ks.

The average 401(k) account balance was $71,500 last year, up 11.4% from $64,200 at year-end 2009, according to Fidelity Investments, a Boston-based mutual fund provider and 401(k) plan administrator. At year-end 2008, the average account balance, battered by that year's plunge in the equities markets, fell to $50,200, a huge drop from 2007 when the average account balance was $69,200.
Source: http://www.401k-withdrawal-rules.com

“You can't underestimate the fact that the markets were very favorable last year,” said Beth McHugh, Fidelity's vp-market insights.

Even with the resurgence of the equities' markets, 401(k) plan participants are more cautious about fully investing their account balances in stock. Thirteen percent of active participants held all of their

401(k) account balances in equities last year, down from 14% in 2009 and 20% in 2007.

[MyPathToPlanB]

12:21 PM on 02/22/2011

#BabyBoomers #401K Plans falling short. Take charge of your life and start your own business. #retirement #business

[SisterAnn]

12:58 PM on 02/21/2011

I am beginning to wonder if the boomer not getting what they were promised was intented to happen.

The boomers worked many years being told, "Pay extra into Social Security and you will have a good Social Security benefit". Boomers paid for Medicare so they could have affordable medical care when they became elderly, but the medical industry increased their prices faster than we could pay more in. Even our life insurance is suddenly dropping us or making it unaffordable. We also had two market crashes that hurt our savings. Then interest has been so low we haven't even kept up with inflation.

Even the younger generations are being fed misinformation about us. I think the middle class did well with what they had to work with.

But, hey, Alan and Andrea are doing great. Alan with his government pension and Andrea for getting paid to be a talk show host that parrots that Social Security is broke and has to be cut.

[dfranz]

10:37 AM on 02/21/2011

The entire 401K system was developed to put money in the pockets of the plan administrators. When the market tanked, so did my 401 k plan. The market has increased well over 3000 points on the DOW while my plan still has not gotten back to where it was before the crash. The problem with these plans is that you have very few options.

[franklinsghost]

09:58 AM on 02/21/2011

The 401 K myth- Over the 20 years ending December 31, 2008, equity mutual fund investors had average annual returns of only +1.87% while the S&P 500 Index averaged +8. 35% over the same time period.Fixed income fund investors had average annual returns of +0.77% over the same 20-year period. Both the equity and fixed income fund investors’ average returns were less than inflation. Note this is BEFORE the crash of 20008-from the study by
-Gary D. Halbert, GDP, AdvisorLink, Halbert Wealth Management, QAIB Study, Dalbar

[Ytrus]

12:47 AM on 02/21/2011

I think HP should run some more articles about how the undisciplined youth is unfit for the work force. That oughta cheer the boomers up; don't worry about your own mess, just complain about how these kids are causing trouble.

[JoeBoy254]

11:39 PM on 02/20/2011

I am so thankful that we have a "Demand Pay" pension that the fund is flush and healthy, in addition to our IRA's and cash accounts. We are at about 70% of our income when we retired. We have FSA for medical which will pay for our insurance premiums and some incidentals. The only thing we have to worry about is our health. I do feel sorry for my "Baby Boomer" friends, but if the really had watched their accounts and what was going on in the economy over the years they would not have been caught flat footed when the bubbles started breaking. If you cannot retire when you planned to and you find yourself having to work, then you will never be able to retire............you will die in harness like an old plow horse and be buried where you dropped.

[Terris Linenbach]

10:12 PM on 02/20/2011

A sucker and his money are soon parted

[SNS]

09:17 PM on 02/20/2011

George Carlin was right about the boomers. A significant number of them fell for Reagan, twice. Now they're acting like the crumbling of the American empire was just bestowed upon them, like they were just walking down the street and someone snatched their pension and 401k. Most of them voted for this in '80 and '84. The idea of blacks getting welfare made them sick, and they ate up Reagan's propaganda. Little did they know that Reagan's handlers really planned on going after the middle class and replacing them with cheaper labor. The boomers just got flat out rooked by Reagan, now they're crying about it. Boomers that didn't vote for Reagan, good for you. But as long as we're talking about boomers, it was your generation that got us into this mess by handing this country over to the Reagan mob.

[MiddleMolly]

10:06 PM on 02/20/2011

Can I ask how old you are?

Few very of my Boomer friends supported or voted for Reagan in 1980. We were in our 20's and 30's back then. But Reagan was able to get the unemployment rate and the inflation rate down by 1984, and he was able to pull down almost every voting bloc, even though I and my friends still didn't vote for him.

The Dems also shot themselves in the foot by putting Geraldine Ferraro on the ballot. The traditional Dem strongholds were simply not ready to vote for a woman VP. And Mondale wasn't a strong candidate.

But blaming people who voted for Reagan 30 years ago does nothing to help the current set of problems. And the last thing we need is Gen X blaming the Baby Boomers, or Gen Y blaming their parents, or the Baby Boomers blaming our parents, for that matter.

The voting public was manipulated by the Reaganites in the 80's, just as the voting public was manipulated by the Repubs and teabaggers three months ago.

[Zilo]

10:40 PM on 02/20/2011

I think people still blame Reagan lovers because he's still such a big conservative hero. It's one thing to realize your mistakes after the era is gone, but to gloss over it usually annoys people.

[jdcrump]

03:14 AM on 02/21/2011

As a 62 yo, I wish I could disagree with you. I didn't have many of my friends who voted for Reagan but I suspect you are right. We anti-war, pro-civil rights boomers were always just one part of our generation and the right wing had lots of boomer campus youth groups in the 60's; they just didn't march and sit-in as much. They learned to make money, often by converting their college drug enterprises into legitimate businesses. As they accumulated money; they suffered from the same greed and selfish impulses so many had before them. It looks like future history will reflect that when our time for leadership arrived, the best we could do was Bill Clinton and the worse was George W. Bush. Then our time passed. We were labeled as the generation of sex, drugs and rock and roll but we were also the generation of peace, love and civil rights. Maybe we will develop a renewed sense of purpose in our twilight years and add something else worthwhile to our generation's curriculum vitae. We shall see. Many of my generation became homeless during the Reagan years when he tripled the homeless rate, especially Vietnam veterans. I think Reagan was a reaction to our activities and I don't want us to be blamed for him. But I can't help thinking you may have it right.

[spytheweb]

08:33 PM on 02/20/2011

You can see how the republicans are trying to destroy this country in Wisconsin by going after unions. It's not about budgets it's about unions and once unions are destroyed they will go after social security. First republicans will have it over to wall street so they can drain and make money from it and then declare it dead and get rid of it all together, medicare will be next.

The way things are going Americans needs social security more than ever. What's going to be there when you're old and sick? I wouldn't be shocked if republicans tried to bring back debtor prisons.

[vindrag]

05:48 PM on 02/20/2011

I tend to think that as bad as things are for the boomers, things will only get worse for the next generation who is starting off life with unbelievable amounts of student loan debt. Realistically most people cannot save and invest enough to retire comfortably. Social security should be revamped to pay out a much greater percentage of post retirement income than it does now. Higher wage earners need to contribute more. Unfortunately our government has decided to invest in the war machine rather than put our resources into the American people who have paid for the wars.

[morgantown]

06:31 PM on 02/20/2011

Agree. My son has $50k in student loans (from grad school alone - his dad and I paid for undergrad) to add insult to injury he was laid off from his job in early Dec. He's been temping while looking for permanent employment, but has found nothing yet. His temp job also ends in a few weeks. His dad and I told him he is welcome to move back in with us, and he's accepted, but is very hard for these young college grads, who've been on their own for 5 or 6 years to suddenly need your parents support.

Everytime I hear talk of raising the retirement age it makes me angry. If some of these folks would retire between 60 & 65, instead of working well into their 70's, these well educated young adults could begin their work lives as a contributing member of society, increase the tax base, help shore up Social Security and let those expensive educations begin to reward America.

And please, don't even get me started on privatizing Social Security....that ship should have sailed already....ask the retirement age boomers what they would do if all their retirement savings had been put into a 401(k) instead of the SS witholding.

[Zilo]

06:38 PM on 02/20/2011

While I certainly understand your frustration (and I'm glad to hear someone speak about the problem of student loan debt), I don't think people in their 60s *want* to keep working. It's that many of them are so scared to retire and run out of money. Bills keep going up for many of these people and some of them just plain didn't save enough money to ever be able to retire.

[Amalek]

08:51 PM on 02/20/2011

Big student loans are just another symptom of the baby boomer generations addiction to easy credit. In this case they told the kids to get a loan so dad and mom did not have to cut back on their spending.

[UDKM2010]

10:20 PM on 02/20/2011

That's some sad stuff right there. I'm paying for my son's education so he can start out without debt as my father did for me. Some people just make better players than fathers.

[Last chance]

05:37 PM on 02/20/2011

The 401K`s were a stunt by big business to get out from under their pension obligations.

It was a swindle from day 1.

[Amalek]

08:30 PM on 02/20/2011

Swindle is too strong of a term.  Business did not steal the 401(k) money.  But they did wash their hands of long term responsibility for people.  That is the Republican ideology.  You are responsible for yourself, and if that does not work out, you deserve to starve.  It is the law of the jungle. Not very civilized, but no one would ever accuse Republicans of being civilized.

But the long term deal with the American worker that promised a pension was broken. Now the deal with government employees to provide them with a pension is under attack. It is mostly about Republican ideology - less so about fiscal responsibility. 

As a society, we need to decide if long-term income security is what we want.  If it is, we need to stop voting for the tea party.

[barrada nicto]

12:53 AM on 02/21/2011

The path to the 401K was a swindle. Creating a loophole in bankruptcy law allowing corporations to rob workers pensions, then faking bankruptcy conditions to access it.

Pushing the 401K as a reasonable retirement vehicle comes very close to a swindle in itself.

[mujino]

04:59 PM on 02/20/2011

US economics: One big Ponzi scheme: While Bernie Madoff languishes in jail, bankers continue to profit as the poor lose their homes and hope.

http://english.aljazeera.net/indepth/opinion/2011/02/2011218151257526294.html

As Noam Chomsky puts it: "The population in the United States is angry, frustrated and full of fear and irrational hatreds. And the folks not far from you on Wall Street are just doing fine. They're the ones who created the current crisis. They're the ones who were called upon to deal with it. They're coming out stronger and richer than ever. But everything's fine - as long as the population is passive."

[vindrag]

05:41 PM on 02/20/2011

Madoff, despicable as he is, makes the perfect scape goat. No need to put anyone else in jail. We caught Bernie, everything is okay. Time to start investing, going into debt again. Chomsky is right as usual, but finally the passive part is starting to change.

[Amalek]

08:31 PM on 02/20/2011

The Republicans are defunding the SEC.  That will stop any chance of enforcement.

[Zilo]

07:09 AM on 02/21/2011

Boy is that not going the help the country. They'll have free reign to commit their crimes.

[Wendy Rosner]

04:50 PM on 02/20/2011

it's pretty much impossible to save enough for retirement when all the cards are stacked against it. where does one find a decent investment? i joined a credit union for better cd rates, but still it's only 2.5%, not even keeping up with inflation, but the big banks pay less than 1%. i had a 401k, which pretty much doubled in value in the nineties, and now it is just back up to slightly more than my contribution. that money is now in an ira but again, it rises a little, and falls hard along with the stock market. i have downsized steadily over the past decade, and now live in as cheap of a place i can find that i feel fairly safe in. i drive a fully paid for 14 y.o. car with almost 200k miles. i have some money from selling a house but again, can't find any place to put it to make a decent return. i can't afford to lose a penny of that in the stock market. i don't make a lot of money, and had a lot of health issues which ate up my income.

i consider myself lucky to have anything, but being a very tail end boomer, expect to only escape destitution by living communally with friends.

get ready folks...this ain't your parents' america.

[Amalek]

08:34 PM on 02/20/2011

Some of us did not buy CD's at credit unions.  We bought GE stock when it hit $7 a share in 2009, and watched it climb to $21 today. 

There are plenty of great investments out there.  You just have to know how to spot them and be willing to take some risk.

[Zilo]

10:44 PM on 02/20/2011

So you've done really well for yourself, I can imagine by your posts here.

[SisterAnn]

12:40 PM on 02/21/2011

But you can't buy GE in your 401k plans. They are prepicked by fund managers.

I have made some money off of stocks. But it is risky. If I didn't have Social Security I would never invest in the market. I have a little in funds now and I will probably lose it. It is ok, it is my husbands:-) just teasing

The more I study the market the more confused I get. I notice that when I get ready to invest in something there seems to be some expert saying not to do it. It happened with gold way after the crash, it happened with China, and it happened oil and other commodities.

[barrada nicto]

12:57 AM on 02/21/2011

" get ready folks...th­is ain't your parents' america. "

Not unless we stand up and change it.

[kingofthenet]

02:11 PM on 02/20/2011

I think investment advisers have a vested interest to scare people, and to move them to high commission bad investments. That being said, I can't believe how many 'Baby-Boomers' are moving into retirement with so much DEBT. It really isn't how much money you have to retire on, it's the debt that kills. A modest amount of savings, paid for house in a good area and pensions/social security, should easily allow you to downsize and live comfortably in a less economically demanding area.I would say one can get by quite easily on 50% or less of Pre-retirement income. It all depends thou, if you want to LIVE like your earning a great salary, than you better keep working, it's the classic TIME/EARNING paradox, which do you value more?

[Amalek]

08:49 PM on 02/20/2011

Correct, but credit was too easy for the boomers.  The big problem was the ease at refinancing your home, taking out the equity to live large, and continuing to borrow to make the payments.  As long as housing values continued to increase, that party could go on.  But when housing prices declined, the hangover arrived - just as the boomers face impending retirement and many already have been involuntarily early retired. 

We are going to face a serious crisis over the next decade dealing with 50-66 year old boomers who are unemployable and broke.  It is a huge social crisis, and the Republican approach will be to let them starve.

[Zilo]

10:46 PM on 02/20/2011

I think the country is headed for another depression. What do you think?