In 1981, it was estimated that a median earner would save $364,000 in a 401k style retirement account by the time they were 60. In reality, however, that worker, at 60 years old in 2016, has saved less than $100,000. Why is there such a disparity between theory and practice? Three reasons. First, not all workers have had access to retirement accounts during their working lives. When emergencies occurred, workers also tapped their retirement savings to overcome the financial obstacles. Finally, fees eroded the savings of those who did contribute to retirement accounts.
- In 2016, the typical 60-year-old had less than $100,000 in their 401(k) account.
- Not all workers have a 401(k) or an IRA, and of those who do, some have gaps in their coverage.
- 95 percent of investors are paying fees, even though over a third of them believe that they do not.
“Though workers growing up now learn about the importance of contributing from a young age, 401(k)s came into existence in 1978 and were never intended to be a primary source of retirement income.”