Generation X has been the alpha tester for the 401(k) retirement system, and the gloomy results are rolling in.
In many ways, Gen X — those born between 1965 and 1980 — has led our nation’s experiment in the shift away from a pension system to a 401(k) system, requiring individuals to save and prepare for their own retirement.
“They are the first generation to rely primarily on their own individual savings through 401(k)-like plans, and therefore, we refer to them as the ‘401(k) experiment’ generation,” Ceder said.
While pensions are still the norm for public-sector state and municipal employers, they have all but vanished in the private sector.
Today, just 11% of private employers offer pensions, compared with 35% in the early '90s. More than half of private-sector employees have a 401(k) plan, according to the Bureau of Labor Statistics.
The reality for Gen X has increasingly been noted in financial industry reports. For instance, Gen Xers say they will need, on average, $1.56 million in savings to retire comfortably, but to date, they have saved only an average of $109,600. More than 1 in 3 Gen X workers have dipped into their savings or taken out a loan to pay for monthly bills.
And how much of that can be blamed on the changing retirement system and how much of it should we write off due to people having no future economic planning or self control when it comes to spending?
As a Boomer I set mine up and maxed it out early, when I worked overseas I fed that 401K like a pig, when I retired I pooled my 3 retirements to live off of and paid off a new Truck and my House with the 401K.
I also set up Company 401K’s for several Friends.
Of course as soon as Biden was about to take the Helm, I cashed out completely.
Ironically 401ks are doing as well as they ever have, thanks to inflation. My return right now is just through the roof. Of course we know what’s going to happen when there’s a course correction.
Many people I know don’t know how to save and control their spending. Many don’t contribute the max pre and post taxes to their retirement. Some only contribute up to how much their company matches; no extra.
I’m lucky that my wife is smart planner financially and a good saver. I’m a few years off from retirement - 5 or 6 years, but our house was paid off 14 years ago, our cars were paid in cash, and we’re still both working. Long term health care is going to be the big worry. Dementia, Alzheimer’s, assisted living…all those are $$$.
And if you end up not hitting the age/service target to retire? You’re screwed.
Inflation goes even a bit higher? It decimates your lump sum pay out.
So few people are left on retirement plans that pay out periodically that if things hiccup, they won’t bail them out. After the GFC didn’t the unions pensions get saved, but the white-collar workers got screwed?
Either a company will underfunded, pension plan, or people won’t put enough into a 401(k). There’s really not a fix to that. The really bigger issue is is that a long-term health of our economy is not looking good. A healthy growing academy has plenty to be able to support people in retirement. That’s not the way we’re going.
Next March is the earliest I can use my TSP (the .gov 401K, not for you chuck but those who might not know) without the 10% penalty. I probably will buy a SPIA to get “lifetime income” of XXXX per month, and with interest rates still high it will be tempting not to wait longer and just do it. The SPIA monthly amount won’t go down because of interest rates, but it will never go up though so inflation will be more painful as time goes on.
To the point of the thread, I am a first-year Gen X’er. The above-mentioned retirement I paid into will only comprise a portion of my total retirement funds. The suggested $1.56M in a 401K ain’t happening! Of course going into retirement with house and vehicles paid off will help lower the amount you “need”.
If we take the college school loans as any kind of model, though they will probably start to compensate the people who didn’t save. Probably along the lines of taxing the 401(k)s and IRAs of people who did.
It’s not realistic to expect every worker to max out pre and post tax contributions every year they work, nor do they need to. If employees contribute about 8% and their employers 4% for their working lives, they should be able to retire as comfortably as their parents did with a pension. Ironically, 12% is what the employee and employer kick in for Social Security and the worker gets peanuts…
I plan to have $1M in my 401K and retire by age 60. Unfortunately, inflation has made $1M a lot less meaningful than even 5 years ago. Im not really worried, I have never been wealthy and have mil retirement, disability, and eventually social security pensions as well.
Most of the workers my age (55) do not contribute as much as I do to 401K, some contribute significantly more.
Add to that there is so much that is out of the average persons control with 401ks. When the housing market crashed almost everyone I knew took something like a 50% hit on their 401k. You might call it investing, but if it can go up and it can go down, it’s gambling…no different than Vegas. Some games have a better probability than others, but it’s still gambling. And if you aren’t somehow on the inside, you are on the outside and the house usually wins.
My 401k is in my gun safes and I’ve done better than most people I know. Not sure if it will be worth a million when I need it, but in my zip code I don’t think I will need that much.
I’m a Gen X’er. I know others in my generation that I work with. Many have never started their 401K, or barely contribute. I’ve never done less than 10% of my gross pre-tax income since I started (as soon as possible) with BNSF. I’m usually doing 10% pre-tax and 3-5% post tax.
Plus I pay into Railroad Retirement both tier 1 and tier 2 instead of Social Security. Currently guys retiring who are married are seeing an annual income from RRB between $75-$90K depending on their average income for their highest earning 60 months. Full retirement age is 60 with 30 years of service. I’m on track to retire on time and I’m married so my wife will get her 48% additional RRB of what mine is for putting up with my stupid ass, plus her SS. Railroad Retirement favors married couples. I guess I will also have some SS too, but the vast majority of my income has been made paying into RRB. Fortunately RRB is fully solvent as far out as the board can project, unlike SS.
My wife has a modest 403B but doesn’t make as much as me and doesn’t contribute as heavily.
I’m 15 years out from retirement age, knock on wood I’ll be ready to retire when I hit 60.
I know lots of people who never even got the kind of job that came with a 401k, they never bought a house, just paid decades of rent. They have no savings to speak of, no investments. The only thing waiting for them is social security. But they work hard and make just enough money to be disqualified from most of the free shit army benefits.
Retirement never was nor will be “comfortable” for all. Many people simply don’t have the education, ambition or IQ to accomplish much nor have any interest in preparing for the future. When they get older things will more difficult and often die early due to health neglect. Nothing new. And the last thing America needs is another government scheme like a SS fund to raid.
Oh I understand Chuck, it’s just that I’ve seen this before with POTUS Carter.
My Dad was retiring from the Military and transitioning to Civilian Life, so by watching my Parents I knew I didn’t want to on one hand “Owe Debt” while on the other hand still having money On the Table. Rising interest rates will kill you.
What Folks out there aren’t seeing is Home Intrest Rates at 15+ percent, but watch inflation because a giant raise in interest rates will happen as this economy falters. That’s how difficult it’s going to be to borrow money and it’s going to hit like a slap in the face.
From what you have shared with us in the past, I am pretty sure your gun safe investments have drastically out performed my 401K
I actually started saving for retirement after the 2008 crash, but as long as folks could put off selling, the drop on portfolio value was temporary, just like the drop from Covid. I will need to move my 401K to less risk pretty soon, to avoid the risk of another crash (which is inevitable) when I don’t have time to recover.
I have plenty of relatives who “cash in” their 401Ks when they move to different jobs, which is pretty dumb. Take a 10% penalty hit, which negates any benefit from employer contributions plus take a tax hit. Of course, the same relatives would get a fat child tax credit refund and buy big TVs and the newest phones while driving cars on bald tires.
People are stupid and some, like SteyrAUG said above, don’t have an opportunity to contribute to a 401K. They will just have to work as long as possible, live with relatives when they stop, and pray to win the lottery.
401k, IRA and Roth have been great tools for average Joe to accumulate wealth that he might not otherwise. It’s not unusual for working class folks to have high six and seven figure accounts. Add home equity into the mix… there’s a lot of million+ net worth families living in middle class neighborhoods.
And that’s the best place you can be. I highly encourage folks to do it otherwise, it’s kind of like throwing cash away. If they are matching you up to X amount of percent, you need to jump on that.
What really concerns me is our current economy, everytime the pendulm swings one way, it has to swing back the otherway to self correct.
[video]https://www.msn.com/en-us/money/markets/janet-yellen-is-sabotaging-the-feds-effort-to-combat-inflation-daniel-lacalle/vi-BB1nhqS9?ocid=BingNewsSerp[/video]
This does not bode well for those of us who sacrificed to retire in to the middle class. She’s creating more inflation at the same time the Fed is trying to fight inflation.
Lots of folks want to know how to fix this, but Trump showed them how it is done.
Get the RINO’s out of the way and let the Man get the job done.
Social security is one of the biggest scams ever created. It is a gov mandated ponzi scene. It cannot be relied upon for retirement.
The ridiculously high cost of college degrees put people in debt. I suspect many workers are not saving for retirement because they have student loans to pay. I made it very clear to my son’s that math matters. $200,000 in student loans to get a $50,000/ year job= Fu@#ed for life.
I explained to my son’s that the earlier they start saving, the better. Young people need to understand the power of compound interest as well ax dollar cost averaging. Putting a bit of money away every paycheck is important. Regardless of swings in the market
I switched careers in my mid 20’s. Left $6000 in an IRA. 25 years later it is worth $37,000. I started other retirement accounts over the years and did ok. I wish I saved more in my 20s
The other thing that destroys retirement is divorce. My next talk with my son’s will address pre nuptial agreements
