Here's a stat that might put a little spring in your step: 90 percent of 401 (k) participants have recouped all of the dollar losses in their plans, according to AP and the Employee Benefit Research Institute (EBRI). I discussed the findings of the analysis with CBS3 this morning.
If most participants are back in the black, why are they so glum about retirement? According to EBRI's recent survey, Americans' confidence in their ability to afford a comfortable retirement has plunged to a new low.
The percentage of workers not at all confident about having enough money for a comfortable retirement grew from 22 percent in 2010 to 27 percent, the highest level measured in the 21 years of the Retirement Confidence Survey (RCS). At the same time, the percentage very confident shrank to the low of 13 percent that was first measured in 2009.Not surprisingly, those who have fewer dollars saved are most anxious about what lies ahead. The study notes that the largest increase occurred among participants who have less than $100,000 in savings. But even those who are at the upper end of the retirement savings spectrum shouldn't be so cocky--the numbers are bleak.
AP said that the average 401 (k) participant aged 55-65 (let's call her "Jane"), who has been grinding it out for more than 30 years, has about $200,000 in her retirement account. That means at retirement, Jane can count on approximately $6,000 from her retirement account (assuming a withdrawal rate of 3 percent) from the 401 (k). Add that amount to her Social Security benefit of approximately $15,000 a year, for a total of $21,000 in retirement income annually.
If Jane can live comfortably on $21,000 a year, then she's all set. If not, she's better think about delaying her retirement, assuming she is lucky enough to have a job. For younger workers, the lesson is clear: save more as early as you can. My recommendation: try to max-out your 401 (k) as quickly as possibly. Forget about 6 percent, which may be the level that entitles you to your employer's match -- you should be aiming for 15 percent. Otherwise, you might be facing Jane's retirement dilemma.
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