Getting the Message on Retirement Savings

401(k) plan balances are actually increasing.
401(k) plan contributions -- and balances -- are back on the increase.
Have Americans finally gotten the message about saving for retirement? Judging from the most recent published stats on 401(k) savings, it would seem so.

Last month, it was reported that 401(k) retirement savings have hit a 12-year high, with an increase of ~3.5% in contributions being charted during the first quarter of 2011.

What about average account balances? Today, those stand at about $75,000. That’s still woefully inadequate considering what (little) people can expect to receive from Social Security as they reach retirement age. But it’s a darn sight better than the ~$41,000 average 401(k) plan balance that existed in 2002.

Of course, averages can be misleading, since the figures can be skewed by some very hefty balances held by a very few highly compensated workers at the top of the heap. In fact, more than 55% of workers have less than $25,000 in their 401(k) plans.

On top of that, nearly one in four plan participants has outstanding loans against their plans.

Clearly, the recession has had a big impact on contribution behavior – even as workers have become more sensitized than ever about the inability of Social Security to cover their retirement needs.

Making 401(k) contributions are not an option for the unemployed, of course, but there are many other workers who were forced to reduce their contributions to cover for losses of family income because of a spouse losing his or her employment.

And some have had to borrow against their plan assets in the more serious circumstances. Those loans are actually up by double digits.

Still, it’s heartening to see the latest numbers … as it appears that “awareness” is now being translated into “action.” Would that we could rely on our local and national politicians to do the same thing …

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