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| Wednesday, July 25, 2007 |
| 401(k) balances up 30% from last year |
This CNN article: 401(k) balances up 30% reports a recent Fidelity Investment study found that median balances of workers who had participated in their 401(k) for at least one year rose 30%. For those with 5 years of continuous participation, it rose 20 percent to $59,000. And among age groups, balances for:
Baby Boomers rose 7 percent to $38,000
Gen Xers rose 10 percent to $15,000
Gen Yers rose 21 percent to $2,100
The increase in balances came both from rising asset values and contributions from workers and company matches.
The average contribution rate for Baby Boomers, was 7.7 percent, just a little above the 7 percent overall average. And even though they are next on deck for retirement, one in three eligible Baby Boomers weren't participating in their 401(k)s at all.
Among participating Gen Xers, the average contribution rate was 6.2 percent. And among Gen Yers, it was 4.6 percent, but two out of three eligible Gen Y workers don't participate at all. Good news that balances are going up instead of down - but bad news on contribution rates. It seems most folks are sticking to the contribution rate most likely to result in getting the company match - not raising the rate to the recommended 10% or higher most retirement planners encourage. |
| posted by Boston Gal @ 11:35 AM *
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| 4 Comments: |
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Are these figures the average? If so, the median might be even smaller...
One other thought - those percentages seem to be close to the 6% that is the common amount companies seem to match - at least people are getting that right!
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"It seems most folks are sticking to the contribution rate most likely to result in getting the company match - not raising the rate to the recommended 10% or higher most retirement planners encourage."
perhaps that is the right strategy.
http://www.huffingtonpost.com/dan-solin/my-401k-plan-a-brutus_b_57595.html
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Hi Anonymous,
Good link to the Huffington Post article. I also hate that most employer sponsored 401(k) plans have less than optimal fund choices and almost invariably high fees. But that is the system we have to work within. I fully fund my ROTH IRA and as I have left employers I moved my old 401(k)'s into Rollover IRA's in a low-cost online brokerage which gives me freedom to invest in my lower-cost and hopefully higher performing funds.
But maxing out my 401(k) contribution gives me the company match, plus income tax break, and steadily increases my retirement savings while dollar-cost-averaging those paycheck contributions into the market.
The 401(k) system is not perfect, but as I said it is what we have and I for one plan on continueing to plow as much money into mine as I am allowed to do and as I can afford to do.
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I just read a Suze Orman article about putting enough in your 401K to get the match and then maxing out the Roth IRA before returning to the 401K. The math (due to tax rates) seemed to work out better by doing this. Personally, my company doesn't "match," we get profit sharing put in our 401K accounts annually which works out to a percentage of our income. But if I didn't contribute at all, I'd still get what they put in.
Accordingly, I opened my first Roth IRA two days ago.
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Are these figures the average? If so, the median might be even smaller...
One other thought - those percentages seem to be close to the 6% that is the common amount companies seem to match - at least people are getting that right!