In a perfect world, the typical worker would have saved $364,000 in a 401(k)/IRA retirement account by the time he or she was aged 55 to 64. Instead, the typical worker at age 55 to 64 has accumulated only $92,000.
What accounts for the gap in what should be and what is? In a study to determine the reasons for the gap, researchers at the Center for Retirement Research (CRR) analyzed IRS tax records and data from the Census Bureau's 2014 Survey of Income and Program Participation. First they estimated potential 401(k) balances in a perfect world—a world in which there is universal coverage, consistent contributions of 9 percent of earnings (6 percent contributed by workers and 3 percent by employers), no early withdrawals, and no fees. In that world, retirement savings for the typical worker aged 55 to 64 would amount to $364,000.
But the world is not perfect. The results of the CRR analysis show that one of the biggest reasons retirement savings are falling short of their potential is the immaturity of the 401(k) system, which went into effect in the early 1980s. Consequently, the "relatively recent shift from traditional pensions to the newer 401(k) plans means that many of today's 60-year-olds did not participate in a 401(k) plan when they were young workers," explain the researchers. Another major reason retirement savings are not as high as they could be is the lack of universal coverage. Many employers do not provide their workers with the opportunity to participate in a 401(k) plan. Lesser reasons for the shortfall are fees and leakages.
Here is how each of these reasons reduces the $364,000 potential in retirement savings to a paltry $92,000...
IRA balance for typical worker aged 55 to 64
$364,000 potential in a perfect system
Reduced to $247,800 after accounting for the immature 401(k) system
Reduced to $136,200 after accounting for the lack of universal coverage
Reduced to $122,800 after accounting for fees
Reduced to $92,000 after accounting for leakages
Source: Center for Retirement Research at Boston College, Why Are 401(k)/IRA Balances Substantially Below Potential?
Showing posts with label saving. Show all posts
Showing posts with label saving. Show all posts
Tuesday, November 12, 2019
Tuesday, July 16, 2019
Why Are So Many Households Financially Fragile?
Forty-one percent of American households say they would have trouble paying an unexpected $400 expense, according to the Federal Reserve Board's 2017 Survey of Household Economics and Decisionmaking (SHED). What accounts for this astonishingly high figure? That's what Anqi Chen of the Center for Retirement Research at Boston College wanted to find out. To determine the reasons for the financial fragility of such a large swath of the population, Chen analyzed 2017 SHED data and the 2016 Survey of Consumer Finances.
Low-income households are most likely to say they could not pay for an unexpected $400 expense. A substantial share of higher-income households also say they could not do it...
Household could not pay for an unexpected $400 expense, by household income
Under $25,000: 72%
$25,000 to $49,999: 59%
$50,000 to $74,999: 40%
$75,000 to $99,999: 34%
$100,000 or more: 17%
Chen found several reasons for this widespread financial fragility. About half of those who say they could not pay an unexpected $400 expense literally do not have $400 in their checking or savings accounts. The question is, why do those who have the money in their bank accounts feel so fragile? Because their funds are needed to pay down debt, says Chen. Student loans, installment loans, and oversized mortgages prevent many households with solidly middle-class incomes from accumulating a rainy day fund that could cover an unexpected $400 expense.
Source: Center for Retirement Research, Why Are So Many Households Unable to Cover a $400 Unexpected Expense?
Low-income households are most likely to say they could not pay for an unexpected $400 expense. A substantial share of higher-income households also say they could not do it...
Household could not pay for an unexpected $400 expense, by household income
Under $25,000: 72%
$25,000 to $49,999: 59%
$50,000 to $74,999: 40%
$75,000 to $99,999: 34%
$100,000 or more: 17%
Chen found several reasons for this widespread financial fragility. About half of those who say they could not pay an unexpected $400 expense literally do not have $400 in their checking or savings accounts. The question is, why do those who have the money in their bank accounts feel so fragile? Because their funds are needed to pay down debt, says Chen. Student loans, installment loans, and oversized mortgages prevent many households with solidly middle-class incomes from accumulating a rainy day fund that could cover an unexpected $400 expense.
Source: Center for Retirement Research, Why Are So Many Households Unable to Cover a $400 Unexpected Expense?
Wednesday, November 14, 2018
Regrets about Not Saving More
What are the chances you will regret not saving more money when you were younger? Better than even, according to a National Bureau of Economic Research study of "saving regret."
NBER researchers measured saving regret by surveying a nationally representative sample of Americans aged 60 or older using the RAND American Life Panel. Respondents were asked to think back to when they were 45-years-old. If they could re-do their spending and saving from then to now, would they save more, save the same, or save less? The finding: Most wish they had saved more when they were younger. Fully 58.5 percent had saving regret.
The researchers correlated saving regret not only with demographic characteristics, but also with other factors such as income shocks—both positive and negative—and personality. Fully 68 percent of respondents with negative income shocks had saving regret. Among those with positive income shocks, a smaller 49 percent had saving regret. Respondents whose planning horizon was longer than 10 years were less likely to have regret (51 percent) than those who planned only a few months ahead (65 percent). By demographic characteristic, younger respondents were more likely to have regret. Among respondents aged 60 to 64, two out of three (65 percent) had saving regret. Among respondents aged 75 or older, the figure was 42 percent. While 45 percent of respondents with a graduate degree had saving regret, the figure was a larger 61 percent among those with a high school diploma or less education.
As you can see from the above statistics, feelings of regret are common—even among those who are seemingly on top of their game. "Perhaps regret or the wish to re-do past decisions is part of the human condition," conclude the researchers. Even among respondents in the top income and wealth quartiles, regret is substantial—39 percent of those in the top wealth quartile and 46 percent of those in the top income quartile had saving regret.
Source: National Bureau of Economic Research, Saving Regret, Working Paper 25238
NBER researchers measured saving regret by surveying a nationally representative sample of Americans aged 60 or older using the RAND American Life Panel. Respondents were asked to think back to when they were 45-years-old. If they could re-do their spending and saving from then to now, would they save more, save the same, or save less? The finding: Most wish they had saved more when they were younger. Fully 58.5 percent had saving regret.
The researchers correlated saving regret not only with demographic characteristics, but also with other factors such as income shocks—both positive and negative—and personality. Fully 68 percent of respondents with negative income shocks had saving regret. Among those with positive income shocks, a smaller 49 percent had saving regret. Respondents whose planning horizon was longer than 10 years were less likely to have regret (51 percent) than those who planned only a few months ahead (65 percent). By demographic characteristic, younger respondents were more likely to have regret. Among respondents aged 60 to 64, two out of three (65 percent) had saving regret. Among respondents aged 75 or older, the figure was 42 percent. While 45 percent of respondents with a graduate degree had saving regret, the figure was a larger 61 percent among those with a high school diploma or less education.
As you can see from the above statistics, feelings of regret are common—even among those who are seemingly on top of their game. "Perhaps regret or the wish to re-do past decisions is part of the human condition," conclude the researchers. Even among respondents in the top income and wealth quartiles, regret is substantial—39 percent of those in the top wealth quartile and 46 percent of those in the top income quartile had saving regret.
Source: National Bureau of Economic Research, Saving Regret, Working Paper 25238
Thursday, November 08, 2018
Big Growth in 401(k) Balances
Consistency pays off. Workers who consistently participate in their 401(k) plan have seen their account balance grow rapidly over the past few years, according to an analysis by the Employee Benefit Research Institute.
EBRI tracked the account balances of workers who contributed (or their employers contributed) to their 401(k) plan in every year from 2010 through 2016 to determine how their accounts did over the time period. They did well. The average plan balance for consistent participants climbed from $75,378 to $167,330 between 2010 and 2016. That's a compound average annual growth rate of 14 percent. Here is how account balances grew over those years by age of worker in 2016...
Average 401(k) account balance of consistent participants in 2016 (and in 2010)
Workers in their 20s: $34,956 ( $3,998)
Workers in their 30s: $77,927 ( $21,804)
Workers in their 40s: $146,624 ( $57,117)
Workers in their 50s: $217,447 ( $99,388)
Workers in their 60s: $204,783 ($117,139)
Source: EBRI, What Does Consistent Participation in 401(k) Plans Generate? Changes in 401(k) Plan Account Balances, 2010—2016
EBRI tracked the account balances of workers who contributed (or their employers contributed) to their 401(k) plan in every year from 2010 through 2016 to determine how their accounts did over the time period. They did well. The average plan balance for consistent participants climbed from $75,378 to $167,330 between 2010 and 2016. That's a compound average annual growth rate of 14 percent. Here is how account balances grew over those years by age of worker in 2016...
Average 401(k) account balance of consistent participants in 2016 (and in 2010)
Workers in their 20s: $34,956 ( $3,998)
Workers in their 30s: $77,927 ( $21,804)
Workers in their 40s: $146,624 ( $57,117)
Workers in their 50s: $217,447 ( $99,388)
Workers in their 60s: $204,783 ($117,139)
Source: EBRI, What Does Consistent Participation in 401(k) Plans Generate? Changes in 401(k) Plan Account Balances, 2010—2016
Wednesday, August 01, 2018
Student Loan Debt, 1992 to 2016
The percentage of households with student loan debt has more than doubled in the past 24 years, according to an Employee Benefit Research Institute analysis of the Federal Reserve Board's Survey of Consumer Finances. In 2016, 22.3 percent of American households had outstanding student loans, up from 10.5 percent in 1992. The percentage of households with student loans increased substantially in every age group during those years...
Percentage of households with student loans in 2016 (and 1992)
Under age 35: 44.8% (24.4%)
Aged 35 to 44: 34.3% (11.7%)
Aged 45 to 54: 23.7% (5.7%)
Aged 55 to 64: 12.9% (2.9%)
Aged 65-plus: 2.4% (1.2%)
Among households with student loans, the median amount owed has more than tripled, after adjusting for inflation—rising from $5,363 in 1992 to $19,000 in 2016. In the 35-to-44 age group, debt has quadrupled...
Median amount owed for student loans by debtors in 2016 (and 1992); in 2016 dollars
Under age 35: $18,500 ($5,363)
Aged 35 to 44: $20,100 ($4,860)
Aged 45 to 54: $20,000 ($6,201)
Aged 55 to 64: $18,000 ($12,234)
Aged 65-plus: $12,000 ($10,223)
While households with and without student loans are equally likely to have saved in a defined-contribution retirement plan, those without student loans have saved much more. Among householders aged 45 to 54 with a college degree, those without student loans had a median balance of $126,000 in their defined-contribution retirement plan in 2016. Those with student loans had a median balance of $46,000.
Source: Employee Benefit Research Institute, Student Loan Debt: Trends and Implications
Percentage of households with student loans in 2016 (and 1992)
Under age 35: 44.8% (24.4%)
Aged 35 to 44: 34.3% (11.7%)
Aged 45 to 54: 23.7% (5.7%)
Aged 55 to 64: 12.9% (2.9%)
Aged 65-plus: 2.4% (1.2%)
Among households with student loans, the median amount owed has more than tripled, after adjusting for inflation—rising from $5,363 in 1992 to $19,000 in 2016. In the 35-to-44 age group, debt has quadrupled...
Median amount owed for student loans by debtors in 2016 (and 1992); in 2016 dollars
Under age 35: $18,500 ($5,363)
Aged 35 to 44: $20,100 ($4,860)
Aged 45 to 54: $20,000 ($6,201)
Aged 55 to 64: $18,000 ($12,234)
Aged 65-plus: $12,000 ($10,223)
While households with and without student loans are equally likely to have saved in a defined-contribution retirement plan, those without student loans have saved much more. Among householders aged 45 to 54 with a college degree, those without student loans had a median balance of $126,000 in their defined-contribution retirement plan in 2016. Those with student loans had a median balance of $46,000.
Source: Employee Benefit Research Institute, Student Loan Debt: Trends and Implications
Monday, July 09, 2018
Student Loans = Less Retirement Savings
Do student loans prevent young adults from saving for retirement? Yes, finds a study by the Center for Retirement Research. Analyzing data from the National Longitudinal Survey of Youth, researchers at CRR examined differences in 401(k) participation and retirement plan assets at age 30 by student loan status at age 25 for the 1980 to 1984 birth cohort.
The findings: 1) Having student loans at age 25 had no impact on 401(k) participation at age 30, the study found. Among college graduates, 61 to 62 percent participated in a 401(k) regardless of student loan status or size of loan. 2) Having student loans at age 25 had a big impact on retirement plan assets at age 30. Those with no education debt had amassed $18,200 in retirement plan assets by age 30, while those with student loans had saved only half as much, regardless of the amount of debt. "The presence of the loan may be more important than the size of the payments," the study concludes.
Source: Center for Retirement Research at Boston College, Do Young Adults with Student Debt Save Less for Retirement?
The findings: 1) Having student loans at age 25 had no impact on 401(k) participation at age 30, the study found. Among college graduates, 61 to 62 percent participated in a 401(k) regardless of student loan status or size of loan. 2) Having student loans at age 25 had a big impact on retirement plan assets at age 30. Those with no education debt had amassed $18,200 in retirement plan assets by age 30, while those with student loans had saved only half as much, regardless of the amount of debt. "The presence of the loan may be more important than the size of the payments," the study concludes.
Source: Center for Retirement Research at Boston College, Do Young Adults with Student Debt Save Less for Retirement?
Wednesday, April 25, 2018
How Much Have Older Workers Saved?
Among the nation's workers aged 55 or older, a substantial 71 percent are "somewhat" or "very" confident that they will have enough money to live comfortably throughout their retirement, according to the 2018 Retirement Confidence Survey. There's a reason so many are confident: older workers have managed to boost their retirement savings.
The share of workers aged 55 or older who report saving little has fallen over the past few years, and the share who report substantial savings has increased, according to the survey. Fully 38 percent of workers aged 55 or older report savings of $250,000 or more in 2018, up from 25 percent in 2015. The percentage of older workers who report savings of less than $25,000 fell from 43 to 28 percent during those years.
Value of savings/investments of workers aged 55 or older, 2018
28% have less than $25,000
7% have $25,000 to $49,999
8% have $50,000 to $99,999
19% have $100,000 to $250,000
38% have $250,000 or more
These figures do not include the value of the primary residence. Older workers are now more likely to report having substantial savings ($250,000 or more) than little savings (less than $25,000), a crossover that occurred in 2017.
Source: Employee Benefit Research Institute and Greenwald and Associates, 2018 Retirement Confidence Survey
The share of workers aged 55 or older who report saving little has fallen over the past few years, and the share who report substantial savings has increased, according to the survey. Fully 38 percent of workers aged 55 or older report savings of $250,000 or more in 2018, up from 25 percent in 2015. The percentage of older workers who report savings of less than $25,000 fell from 43 to 28 percent during those years.
Value of savings/investments of workers aged 55 or older, 2018
28% have less than $25,000
7% have $25,000 to $49,999
8% have $50,000 to $99,999
19% have $100,000 to $250,000
38% have $250,000 or more
These figures do not include the value of the primary residence. Older workers are now more likely to report having substantial savings ($250,000 or more) than little savings (less than $25,000), a crossover that occurred in 2017.
Source: Employee Benefit Research Institute and Greenwald and Associates, 2018 Retirement Confidence Survey
Thursday, January 25, 2018
Working Longer Is More Powerful than Saving More
Yadda, yadda, yadda...you've heard it all before. Work longer, claim Social Security benefits later, and you will have more money in retirement. You may have heard it before, but you haven't seen evidence as convincing as this. A National Bureau of Economic Research study computes the power of working longer relative to saving more, and it's mind boggling...
Source: National Bureau of Economic Research, The Power of Working Longer, Working Paper 24226 ($5)
- Let's say you're relatively young and want to increase your standard of living in retirement. So you decide to save more in your 401(k). You save 1 percentage-point more for 30 years. How much longer would you need to work to equal 30 years of additional savings? Three months.
- Let's say you're relatively old and want to increase your standard of living in retirement. So you decide so save more in your 401(k). You save 1 percentage-point more for 10 years. How much longer would you need to work to equal 10 years of additional savings? One month.
Source: National Bureau of Economic Research, The Power of Working Longer, Working Paper 24226 ($5)
Wednesday, September 20, 2017
Median IRA Balance: $31,742
Individual retirement accounts hold 25 percent of all retirement plan assets in the U.S., reports the Employee Benefit Research Institute. In the 7th annual update of its IRA Database, EBRI estimates a median balance of $31,742 in the IRAs of individual owners in 2015. The average balance was $125,045. Here are median balances by age of owner...
Median IRA account balances
Under age 25: $3,565
Aged 25 to 29: $4,622
Aged 30 to 34: $7,113
Aged 35 to 39: $11,244
Aged 40 to 44: $16,738
Aged 45 to 49: $23,439
Aged 50 to 54: $31,440
Aged 55 to 59: $41,733
Aged 60 to 64: $57,859
Aged 65 to 69: $78,612
Aged 70-plus: $80,968
IRA balances are modest because few owners contribute in a year's time—only 14.1 percent contributed in 2015. Those with Roth IRAs are more likely to contribute (26 percent) than those with traditional IRAs (7 percent). Among those who contributed, only 54 percent contributed the maximum allowable amount.
Source: Employee Benefit Research Institute, 2015 Update of the EBRI IRA Database: IRA Balances, Contributions, Rollovers, Withdrawals, and Asset Allocation
Median IRA account balances
Under age 25: $3,565
Aged 25 to 29: $4,622
Aged 30 to 34: $7,113
Aged 35 to 39: $11,244
Aged 40 to 44: $16,738
Aged 45 to 49: $23,439
Aged 50 to 54: $31,440
Aged 55 to 59: $41,733
Aged 60 to 64: $57,859
Aged 65 to 69: $78,612
Aged 70-plus: $80,968
IRA balances are modest because few owners contribute in a year's time—only 14.1 percent contributed in 2015. Those with Roth IRAs are more likely to contribute (26 percent) than those with traditional IRAs (7 percent). Among those who contributed, only 54 percent contributed the maximum allowable amount.
Source: Employee Benefit Research Institute, 2015 Update of the EBRI IRA Database: IRA Balances, Contributions, Rollovers, Withdrawals, and Asset Allocation
Thursday, August 10, 2017
How Much Money Is In 401(k) Accounts?
According to the Employee Benefit Research Institute, 54 million American workers were active 401(k) participants in 2015. Total 401(k) assets amounted to $4.4 trillion at the end of 2015—19 percent of all retirement assets. But how much have individual participants stashed away?
EBRI has the answers. The median 401(k) account balance was $16,732 in 2015. The average balance was $73,357. Here is the distribution of participants by the size of their account...
Distribution of 401(k) participants by size of account, 2015
$10,000 or less: 41.3%
$10,001 to $50,000: 28.2%
$50,001 to $100,000: 11.1%
$100,001 to $200,000: 9.1%
$200,001 or more: 10.2%
Source: Employee Benefit Research Institute, 401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2015
EBRI has the answers. The median 401(k) account balance was $16,732 in 2015. The average balance was $73,357. Here is the distribution of participants by the size of their account...
Distribution of 401(k) participants by size of account, 2015
$10,000 or less: 41.3%
$10,001 to $50,000: 28.2%
$50,001 to $100,000: 11.1%
$100,001 to $200,000: 9.1%
$200,001 or more: 10.2%
Source: Employee Benefit Research Institute, 401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2015
Friday, May 19, 2017
How Many Have Retirement Accounts?
How many households have an IRA and/or a defined-contribution retirement account? According to an Employee Benefit Research Institute analysis of the 2013 Survey of Consumer Finances, 61 percent of households headed by workers aged 25 to 64 have at least one of these types of retirement savings. Here is the percentage by age of householder...
Total, 25 to 64: 61.1%
Aged 25 to 34: 50.4%
Aged 35 to 44: 60.0%
Aged 45 to 54: 63.6%
Aged 55 to 64: 71.4%
Source: Employee Benefit Research Institute, Importance of Individual Account Retirement Plans and Home Equity in Family Total Wealth
Total, 25 to 64: 61.1%
Aged 25 to 34: 50.4%
Aged 35 to 44: 60.0%
Aged 45 to 54: 63.6%
Aged 55 to 64: 71.4%
Source: Employee Benefit Research Institute, Importance of Individual Account Retirement Plans and Home Equity in Family Total Wealth
Wednesday, March 22, 2017
How Much Have Workers Saved?
Most American workers are saving for retirement. Overall, 61 percent of workers aged 25 or older say they or their spouse have saved money for retirement, according to the Employee Benefit Research Institute's 2017 Retirement Confidence Survey. In every age group, most say they have saved for retirement, with the figure ranging from a low of 52 percent among workers aged 25 to 34 to a high of 70 percent among workers aged 55 or older.
But many workers have not saved much. Most aged 25 to 34 have less than $10,000 in savings and investments, not counting home equity or defined-benefit pensions. At the other extreme, the majority of workers aged 55 or older have saved at least $100,000, and 35 percent have saved $250,000 or more.
Less than $10,000 in savings
Aged 25 to 34: 58%
Aged 35 to 44: 31%
Aged 45 to 54: 33%
Aged 55-plus: 28%
$10,000 to $100,000 in savings
Aged 25 to 34: 29%
Aged 35 to 44: 35%
Aged 45 to 54: 26%
Aged 55-plus: 17%
$100,000 or more in savings
Aged 25 to 34: 13%
Aged 35 to 44: 34%
Aged 45 to 54: 42%
Aged 55-plus: 53%
Source: Employee Benefit Research Institute, 2017 Retirement Confidence Survey
But many workers have not saved much. Most aged 25 to 34 have less than $10,000 in savings and investments, not counting home equity or defined-benefit pensions. At the other extreme, the majority of workers aged 55 or older have saved at least $100,000, and 35 percent have saved $250,000 or more.
Less than $10,000 in savings
Aged 25 to 34: 58%
Aged 35 to 44: 31%
Aged 45 to 54: 33%
Aged 55-plus: 28%
$10,000 to $100,000 in savings
Aged 25 to 34: 29%
Aged 35 to 44: 35%
Aged 45 to 54: 26%
Aged 55-plus: 17%
$100,000 or more in savings
Aged 25 to 34: 13%
Aged 35 to 44: 34%
Aged 45 to 54: 42%
Aged 55-plus: 53%
Source: Employee Benefit Research Institute, 2017 Retirement Confidence Survey
Thursday, January 19, 2017
IRA Balances Are Growing
Americans are saving more in their IRAs. The median balance of IRA accounts has grown since 2011, according to a report by the Employee Benefit Research Institute. Here is the trend...
Median IRA balance
2014: $33,185
2013: $32,179
2012: $27,987
2011: $23,785
2010: $25,296
These medians are for all accounts, including recently opened IRAs. The EBRI report also examines the IRA balances of "consistent account owners"—those who owned an IRA in every year from 2010 through 2014. The median IRA balance of consistent account owners grew from $26,508 in 2010 to $40,980 in 2014.
One reason IRA balances are not growing faster is that most owners do not contribute. Among consistent account owners for the 2010-to-2014 time period, the 61.5 percent majority contributed nothing in any of those years. Only 10.4 percent contributed in all five years.
Source: EBRI, Individual Retirement Account Balances, Contributions, Withdrawals, and Asset Allocation Longitudinal Results 2010–2014: The EBRI IRA Database
Median IRA balance
2014: $33,185
2013: $32,179
2012: $27,987
2011: $23,785
2010: $25,296
These medians are for all accounts, including recently opened IRAs. The EBRI report also examines the IRA balances of "consistent account owners"—those who owned an IRA in every year from 2010 through 2014. The median IRA balance of consistent account owners grew from $26,508 in 2010 to $40,980 in 2014.
One reason IRA balances are not growing faster is that most owners do not contribute. Among consistent account owners for the 2010-to-2014 time period, the 61.5 percent majority contributed nothing in any of those years. Only 10.4 percent contributed in all five years.
Source: EBRI, Individual Retirement Account Balances, Contributions, Withdrawals, and Asset Allocation Longitudinal Results 2010–2014: The EBRI IRA Database
Wednesday, June 01, 2016
Does the Empty Nest Boost Savings?
To save enough for retirement, empty nesters are supposed to put the money they once spent on children into retirement savings. Do they? The results of a Center for Retirement Research analysis show empty nesters do save more, but the increase is miniscule.
Analyzing data from the Health and Retirement Study and the Survey of Income and Program Participation, CRR researchers determined how much a household's 401(k) savings increased after their children left home. Theoretically, 401(k) savings should climb by 12 percent once the nest is empty. But the analysis of the HRS data found an increase of only 0.3 to 0.6 percent, and the analysis of the SIPP data found an increase of just 0.7 percent.
The researchers conclude: "Although this finding is not the last word on the subject—perhaps parents assist children financially even after they have left home—it does suggest that we should be concerned about households' preparedness for retirement."
Source: Center for Retirement Research at Boston College, Do Households Save More When the Kids Leave Home?
Analyzing data from the Health and Retirement Study and the Survey of Income and Program Participation, CRR researchers determined how much a household's 401(k) savings increased after their children left home. Theoretically, 401(k) savings should climb by 12 percent once the nest is empty. But the analysis of the HRS data found an increase of only 0.3 to 0.6 percent, and the analysis of the SIPP data found an increase of just 0.7 percent.
The researchers conclude: "Although this finding is not the last word on the subject—perhaps parents assist children financially even after they have left home—it does suggest that we should be concerned about households' preparedness for retirement."
Source: Center for Retirement Research at Boston College, Do Households Save More When the Kids Leave Home?
Wednesday, May 04, 2016
401(k) Balances Have Grown Since Great Recession
Among workers who participate in 401(k) retirement plans, these are the median and average 401(k) balances held in plans sponsored by their current employer...
Median balance
2014: $18,127
2010: $17,686
2008: $12,655
Average balance
2014: $76,293
2010: $60,329
2008: $45,519
Source: Employee Benefit Research Institute, 401(k) Plan Allocation, Account Balances, and Loan Activity in 2014
Median balance
2014: $18,127
2010: $17,686
2008: $12,655
Average balance
2014: $76,293
2010: $60,329
2008: $45,519
Source: Employee Benefit Research Institute, 401(k) Plan Allocation, Account Balances, and Loan Activity in 2014
Monday, March 28, 2016
The Retirement Plan Problem
Houston, Atlanta, Kansas City, Miami...we have a problem. The problem is the lack of employer-sponsored retirement plans for about half the nation's private-sector workers. Because so many workers do not have access to a retirement plan, reports the Center for Retirement Research, one-third of households will end up with no retirement plan coverage at all during their worklife. Many others will have inadequate savings because they moved in and out of coverage as they changed jobs over the years.
Although the Obama administration proposed "automatic IRAs" in 2009, federal legislation has yet to be enacted. Consequently, some states (California, Connecticut, Illinois, and Oregon) are taking the initiative and mandating automatic IRAs. The Center for Retirement Research report examines these state initiatives and other attempts to broaden retirement plan participation. "A national Auto-IRA plan would be a much more efficient way to close the coverage gap," the report concludes.
Source: Center for Retirement Research at Boston College, State Initiatives to Cover Uncovered Private Sector Workers
Although the Obama administration proposed "automatic IRAs" in 2009, federal legislation has yet to be enacted. Consequently, some states (California, Connecticut, Illinois, and Oregon) are taking the initiative and mandating automatic IRAs. The Center for Retirement Research report examines these state initiatives and other attempts to broaden retirement plan participation. "A national Auto-IRA plan would be a much more efficient way to close the coverage gap," the report concludes.
Source: Center for Retirement Research at Boston College, State Initiatives to Cover Uncovered Private Sector Workers
Friday, November 27, 2015
Empty Piggy Banks
How much money could the typical household access within 30 days to cover the cost of a financial shock? According to the Survey of American Family Finances, the median household could get its hands on just $3,000 within 30 days. That's not much of a buffer, and it includes credit cards and help from friends and family.
In the second of three reports on the finances of American households, Pew Charitable Trusts examines the financial assets available to families when they experience a financial shock. That's when, not if. Financial shocks are the norm. Fully 60 percent of households experienced a financial shock in the past year, according to the findings of Pew's first report, available here.
One of the most important resources for weathering a financial shock is liquid savings, which Pew defines as money in a checking or savings account, cash saved at home, and the value of unused prepaid cards. The typical household has only $3,800 in liquid savings, and a substantial one in four has less than $400.
Source: The Pew Charitable Trusts, What Resources Do Families Have for Financial Emergencies?
In the second of three reports on the finances of American households, Pew Charitable Trusts examines the financial assets available to families when they experience a financial shock. That's when, not if. Financial shocks are the norm. Fully 60 percent of households experienced a financial shock in the past year, according to the findings of Pew's first report, available here.
One of the most important resources for weathering a financial shock is liquid savings, which Pew defines as money in a checking or savings account, cash saved at home, and the value of unused prepaid cards. The typical household has only $3,800 in liquid savings, and a substantial one in four has less than $400.
Source: The Pew Charitable Trusts, What Resources Do Families Have for Financial Emergencies?
Wednesday, February 04, 2015
Emergency Cash: How Long Would It Last?
Most households have little money saved for emergencies, according to an analysis of the 2013 Survey of Consumer Finances by the Pew Charitable Trusts. Financial advisors recommend having three to six months of income in liquid savings (cash, checking, and savings accounts). By income quintile, here is how much liquid savings households have for emergencies...
Top quintile: 52 days
Fourth quintile: 30 days
Middle quintile: 21 days
Second quintile: 15 days
Bottom quintile: 9 days
Source: The Pew Charitable Trusts, The Precarious State of Family Balance Sheets
Top quintile: 52 days
Fourth quintile: 30 days
Middle quintile: 21 days
Second quintile: 15 days
Bottom quintile: 9 days
Source: The Pew Charitable Trusts, The Precarious State of Family Balance Sheets
Tuesday, August 05, 2014
Median Retirement Savings Is Growing
Median amount households have saved for retirement, 2014 (and 2007), by generation...
Boomers: $127, 000 ($75,000)
Gen Xers: $70,000 ($32,000)
Millennials: $32,000 ($9,000)
Note: Median excludes those who said they were unsure or declined to answer—23 percent of Millennials, 17 percent of Gen Xers, and 19 percent of Boomers.
Source: Transamerica Center for Retirement Studies, 15th Annual Transamerica Retirement Survey, The Retirement Readiness of Three Unique Generations: Baby Boomers, Generation X, and Millennials
Boomers: $127, 000 ($75,000)
Gen Xers: $70,000 ($32,000)
Millennials: $32,000 ($9,000)
Note: Median excludes those who said they were unsure or declined to answer—23 percent of Millennials, 17 percent of Gen Xers, and 19 percent of Boomers.
Source: Transamerica Center for Retirement Studies, 15th Annual Transamerica Retirement Survey, The Retirement Readiness of Three Unique Generations: Baby Boomers, Generation X, and Millennials
Monday, May 26, 2014
Median IRA Balance: $27,987
Among all IRA owners in 2012, the median balance of their IRA account(s) was $27,987. The balance rises slowly with age: $3,360 for IRA owners under age 25, $4,721 for those aged 25 to 29, $7,036 for those aged 30 to 34, and surpasses $10,000 ($11,003) for IRA owners aged 35 to 39. It continues to rise with age, peaking at $66,852 for owners aged 65 to 69.
Source: Employee Benefit Research Institute, Individual Retirement Account Balances, Contributions, and Rollovers, 2012; with Longitudinal Results 2010-2012: The EBRI IRA Database
Source: Employee Benefit Research Institute, Individual Retirement Account Balances, Contributions, and Rollovers, 2012; with Longitudinal Results 2010-2012: The EBRI IRA Database
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