I'm going to dispense with the foreplay today and get directly to the point on account of a Stanley Cup hangover. That is not what it sounds like, being neither a literal hangover (no alcohol was involved) or juvenile slang for some kind of unlikely sex act. It is simply the lack of energy one feels after four hours of emotionally charged playoff hockey.

So the Baby Boomers, the generation that brought us Social Security privatization and phasing out the few pension plans they didn't bankrupt, love them some 401(k)s. Saving for retirement isn't the government's business or employers' responsibility. We'll all save for our own retirements and our golden years will be full of vacations and luxury cars and cruises and the extra-swanky $14.99 buffet at the Golden Nugget. That sounds swell.

Unfortunately most Americans earn dick, hence even at 10-15% of their income 401(k)s or other similar retirement plans accumulate precious little savings. The average middle class couple needs a cool million dollars to retire comfortably, assuming one lives for 20 more years after retiring, although millions of retirees obviously get by on far less and will continue to do so. Is anyone actually saving that much?

According to this very thorough report from the Employee Benefit Research Institute, the average 401(k) plan is valued at around $80,000. The median value is less than $60,000. So more than half of Americans who are engaged in these pre-tax withholding savings plans have accumulated barely enough to last a few years in retirement. They'll still be living off Social Security, in essence, unless they are lucky enough to have a pension that isn't bankrupt.

True, mean/median aren't great statistics here because many young people with 401(k)s haven't had the time to accumulate a decent balance. But note (p. 12) the average balance for individuals over 60 who have had a 401(k) for more than thirty years: $179,573. Sure, that's a nice piece of change, but when you start doing the math it doesn't amount to much over the 15-20 years most people expect/hope to live in retirement. Given that the $180,000 figure is an average and thus distorted by individuals with very large accounts, we can safely assume that the majority of plan holders have far less saved. Even if people are contributing the recommended 15% of their earnings into a 401(k) (and it is reasonable to doubt that many are) the problem with this grand design is that 15% of not much is…not much.

In short, people who are retiring in the next ten years can talk all they want about "saving for retirement" but the fact remains that the majority of them would be quite screwed without employee pension plans and/or Social Security. And it's not simply a question of needing more time to let the savings add up – even over 30+ years it's unlikely that most working Americans can save enough in this kind of scheme to continue their working-age lifestyle into a retirement of any appreciable length. Plus, unlike pensions, 401(k)s have that added benefit of forcing people to put off retirement for a few years until the stock market isn't in the tank.

Chalk up another victory for the free market. Down with socialist old age welfare plans! Unburden our businesses of costly pension obligations! Americans' robust personal savings habits combined with the genius of privately-administered investing schemes will guarantee our standard of living in retirement.

45 thoughts on “LEADING BY EXAMPLE”

  • Back in the day when some WH administration "economists" were lambasting Americans for "not saving enough" I had a feeling that was code for "not putting your money in our friend's banks so they could use it to invest and give you 2-3% interest on while they made double or triple that".

    WTH are the above posts?

  • I'm not a flaming conservative, in fact I lean liberal on many issues, but why is it that whenever we see a report that shows that Americans aren't saving enough for retirement, the response from the left is "the government needs to do more" and not "people need to do a better job of planning and saving"? If you spend all your money today, you won't have it tomorrow, that should just be common sense. If you have no common sense, why should you expect to be bailed out by the taxpayers? Who do these people think they are, giant financial firms?

  • @Jimcat: The point is that most people do not make enough in order to "do a better job of planning and saving."

  • jeffteaches says:

    As I often tell my students, Jimcat, read the piece carefully before responding. Ed isn't proposing MORE involvment on the part of or programs developed by our government. He is pointing out how the conservative hard-on for "responsibility" would kill quite effective retirement programs by privatizing them, in effect handing the money over to the same douches who just took America for a ride. The relevant quotation follows: "…the fact remains that the majority of them would be quite screwed without employee pension plans and/or Social Security."

  • Retirement at 55-66 years of age is an unsustainable fantasy, an aberration. The fact that vast sums of our national wealth goes into motor homes, cruises, time shares, and other useless end products doesn't help things. Why has being an old person turned into a narcissistic pursuit of selfish gratification?

  • I'm not sure why you are hammering Baby Boomers…didn't this start even before Baby Boomers, when their parents were talked into swallowing the whole "American Dream" marketing ploy the finance industry foisted on this country after WWII?

  • Ed, you really should lose the baby boomer axe. ERISA and the 401ks came in 1974, when I, a boomer, started college. And I'm in the middle of this age cohort, not at a fringe.

    Besides the other excellent points you made about the switch to self-funded retirement, no one thought to educate a workforce about how to invest. Hence an entire industry of "financial advisors", most of whom know dick. And several generations of American who are going to be very surprised as they reach their "golden years".

  • ladiesbane says:

    Am I the only person in the room whose (shriveled, cashew-like) 401k gets invested in the fucked-up merry-go-round called the stock market? If so, it's not savings, it's gambling, and get over it. Unless you are qualified to do this for a living, you are trusting a stranger with your money. Poring over your "investment choices" is a reassuring delusion. It's the chicken or fish, kid, and they come out of the same pot.

    Most people don't make enough money to experience justifiable rapture over setting aside pre-tax dollars. The only thing that makes it worth a small part of my small income is any matching funds my employer offers. But a 401k has never been a retirement plan.

  • If you research the history of the stock market…it was considered sin by the church in the early 1900's to play the stock market…it was "divining the future" or in other words..GAMBLING. Over the course of the century it got a major image makeover…

  • The key phrase is that if you want to retire in your early/mid 60s (or need to because you have been replaced by younger talent) and if you want to maintain a middle-class lifestyle without help from social security or an employer pension fund, you need about a million dollar fund.

    Unfortunately, middle-class salaries do not allow you to save this much if you only save 15% of your salary.

    I ran a quick calculation: IF you started working 40 years ago at $20,000/yr, and IF your salary increased 3% every year such that you retire today at a salary of $63,000/yr, and IF you save 15% of that salary every year, and IF that savings grows at 3%/yr, THEN the fund today at retirement would be $380,000.

    You just can't get there from here.

    Obviously, a young person today would start out with a bigger salary and retire with a bigger salary, but he will also need a bigger stake at retirement.

    Sorry guys, but the middle-class just should not believe all the press about livin' the good life…

  • Jimcat Says: If you spend all your money today, you won't have it tomorrow, that should just be common sense.

    Many people barely make enough to pay the basics. They could spend 2/3 of their salary for housing, utilities & food. Maybe they set aside $25-50 a month for savings, then all of a sudden they need brakes and tires for their car, which they need to get to work. The next month they have to go to the doctor and dentist because they can't take the pain anymore. All the savings they had was wiped out in two months. Unlikely? This recently happened to my sister and I've seen similar things happen to friends. So yeah, people oftentimes have to spend all they have today in order to just get by, with nothing left for tomorrow.

  • displaced Capitalist says:

    it was "divining the future" or in other words. GAMBLING. Over the course of the century it got a major image makeover

    So is insurance.

    (sorry for the double post, the first got mangled somehow.)

  • Crazy for Urban Planning says:

    Remember Animal Farm? The pigs wouldn't let any other animals retire. I think that was the plan all along.

  • David, I like your back of the envelope, but let's do a little sensitivity, too. If you get just 4% on your savings — very reasonable over a period of time with a perfectly conservative mix of investments — you end up with almost half a million.

    And since we're piling on "IFs", what if you got to keep and save the other 15% or so of your paycheck that goes to Social Security? There's your million. Or if you like Social Security (which statistically earns you far less than your 3%), add that monthly SS check to what you take from the half million you stashed on your own. You're not living the high life, but at the incomes you assumed, you're reasonably close to the lifestyle you were living before retirement.

    The problem isn't the free market or Baby Boomers as a generation, it's too many people's belief that some magic seven figure sum will suddenly appear in their bank account at age 65, or 62, or 57. Where in the world did that come from?

  • Entomologista says:

    The amount of victim-blaming that goes on with financial advice pisses me off. I'm not poor because I'm stupid and irresponsible, I'm poor because I'm a grad student making 18k/year. I'm thinking about going into the Peace Corps after I graduate, and my mom told me that's a bad idea because I need to get a real job and start saving for retirement. Good joke, mom. We are all so, so fucked.

  • Wow. I'm 33 and have been with my current employer for almost 5 years. My salary is about $60k pre-tax, health insurance, etc…

    I've been participating in the 401(k) since I got here and have saved a little more than $20K in that time. According to the conservative predictions and Social Security (which I know is a questionable gambit), if I save at the current rate of $200/month + an equal employer match I will have $90,000 a year in retirement income at age 62.

    I know my salary is higher than a lot of folks, but I'm not pulling down a killer salary either.

    I understand the bashing of the boomers, and I empathize with folks who work hard, make dick for a salary and are being told to sack-up and start saving.

    But I certainly don't understand why we'd adopt the American Dream of our parents and grandparents – especially when the arguments flow forth about how shallow, narcissitic and assinine they are…

    If we all think retiring at 60 to buy the Winnebago and winter in Tuscon is outdated/stupid/irresponsible, why are we so focused on whether or not we will be able to do the same?

  • Entomologista, you bring up a good point: where is the line between survival income and "I can't live without my (nonessential whatever)"? My grandparents were dirt poor, but saved money no matter what, believing that if you are not saving money, you are living beyond your means. If you have to live in a boarding house, work two jobs, and walk five miles to work, do so; it's more important to have money for a rainy day. Grandma worked her whole life as a part-time housekeeper, but she died with more cash in the bank than the average 401k holds, apparently.

    Do you know people who would reply with a hearty "Fuck THAT" if asked to cut off their cable, sell their cars, stop having their hair streaked, live in a trailer, drop Netflix, cut up their credit cards, and save that money instead? I do. Are we really fucked if we're not prepared to save money? Sure, but it's by choice for many. Not all, but many.

  • OneMadClown says:

    It may not be entirely relevant to the conversation, but living in my income bracket you're also reasonably likely to have to cash out a chunk of your 401k before retirement to pay for some unforseen circumstance. I freely admit to knowing just this side of dick about economics and investing, but I know that my gramps was able to live out his retirement in relative comfort, not luxuriously but without any money-related fear, on his railroad pension. My parents certainly won't have that, and at this rate, I'll be lucky to see retirement age.

  • Yeah, if Americans quit spending their money on stupid shit and going into debt, they would undoubtedly be better off. Of course this would depend on Americans not being brainwashed 24/ 7 on being consumers of aforementioned shit. Then of course since the ruling class has sold off this country's manufacturing base, if Americans had some fundamental change in their psychology, the entire rickety structure of our vodoo economy, based on consumerism and debt, would fall apart in a heartbeat.
    What the fuck do you call it when the dealer sells the junkie overpriced smack and then berates the junkie for not being able to pay for it? A crime, right? In America they call it politics.

  • I personally recommend my chosen retirement plan: invest in a whopping great life insurance policy, then wait 'til you're 55 or so, then start smoking, drinking, and main-lining bacon. Call it "seppuku-by-lifestyle." Wife and loved ones will toast my memory aboard their yacht in the Mediterranean, and I'll be spared the alternative of eating cat food on my 10-minute lunch-break at Walmart for the last 15 years of my miserable life.

  • Save early, save often, and fight to preserve your Social Security — after all, you paid for it. You own it.

    With regards to those in the room who don't make too much, the Obama Admin has proposed a refundable extended Saver's Credit. Eligibility: Married couples filing jointly with incomes up to $55,500, Heads of households with incomes up to $41,625, and Married individuals filing separately and single taxpayers with incomes up to $27,750

    Real quick the Admin is proposing for every $ you save, you would get 50 cents matched, up to $1000 a year. Save roughly $650 and get $325 from the Govt. If you are making only $25,000, putting away $650 is approximate to saving 2.7% of your earnings. So match that with the Admin expanded Saver’s Credit and for roughly $12 bucks a week, you can save $1000 annually. Modest yes, but there is potential for big gains over the long run — even if invested T-Bills, which are free from default risk, credit risk, and inflation risk.

    Back of the envelop calculation shows $1000 every year from 25 to 65 invested in Treasury Inflation Protected Security (or TIPS) would yield $111,708. Blend in some equity participation in a basic index fund (assuming a modest 5% real return), while still protecting for the principal and accounts could stretch to $523,405.

    Even if you are making "dick," diligent, regular savings — way below the proposed 10% or 15% level mentioned by Ed — can result in significant retirement savings which can provide an meaningful supplement to your Social Security check – presuming we don’t let the shits on the fiscal commission strip it behind closed doors.

  • ladiesbane, that's exactly what I'm talking about. America needs more people like your grandparents.

  • I had a 401k, not a huge amount in it, but it was still a blow when it all went *poof* in the stock market fiasco last year. Now, it just has bats living in it.

  • I'm thinking about going into the Peace Corps after I graduate, and my mom told me that's a bad idea because I need to get a real job and start saving for retirement.

    I hate to say it, but la mam

  • I'm thinking about going into the Peace Corps after I graduate, and my mom told me that's a bad idea because I need to get a real job and start saving for retirement.

    I hate to say it, but la mama del Entomologista is off-base here. Peace Corps (in most countries) trains volunteers to be happy living on a level far, far below the US poverty level, hence returned volunteers are better set to enjoy their retirement than those who don't leave the States. (Assuming you marry someone like-minded.)

    I can eat rice and lentils twice a day every day and still be pretty happy. Though I do miss the views of the Himalayas out my window. And the water-buffalo milk.

  • The next person who lectures about grannie and grandpa working 12 jobs each and doing without and retiring with millions should be dragged out back and shot.
    Stupid, meaningless comparisons. I'll start with the life expectancy having been a good two decades less because of the stress such a life style brought with it.
    So why stop at grannies time. Think of how much better we'd all live if we adopted the lifestyle of medieval peasants…..

  • I'm with Bob. Medieval peasants didn't have to worry about retirement at all! And healthcare was much cheaper too! Clearly we need to return to the feudal system and all our problems would go away.

    Or if we don't want to go that far back, we can just repeal Child Labor laws, so our children could start saving for retirement earlier!

    Because remembering how people used to live never discounts or ignores the problems that era had!


  • BK, you do realize that $90K per year 30 years from now is probably the equivalent of $30-50K per year today. and how many years would you get your $90,000 for? So far some indeterminate number of years you would get to live at the equivalent of half your current salary, not exactly a bonanza of wealth

  • Paul W. Luscher says:

    Hey dude, can you lay off us Baby Boomers? We didn't ALL vote for Ronald Reagan. We didn't ALL think turning America over to Big Corp. was a good idea. We didn't ALL think wiping out pensions was a good idea. We aren't ALL happy about 401Ks. and oh yeah, we're not ALL real thrilled with the idea of tampering with Social Security, now that the Repubs are suddenly worried about deficits (though it didn't bother them before 2010…)

    Hey, it's all they left me once I was able to get into the work force (after a long struggle and many rejections). And after what happened to my 401K in the Great Recession, I realize what a scam the whole thing is. Great for banksters, not so good for me…

    Of course, us Boomers bitched out the generation before us (our parents)and damned them for "screwing things up." Then we became our parents. Now you're damning us for "screwing things up." Don't worry, your turn to "screw things up"will come…

  • ladiesbane says:

    Sorry, Bob: one reason we lived four generations under the same roof was that the old folks approached triple digit ages — possibly because they didn't drink, smoke, live on fast food, or sit on their asses for business and pleasure. My own life is likely to be much shorter, thanks to my vices, and laziness, and the college education that took me off the farm and into the city.

    I don't judge anyone but myself; I believe each is free to go to hell in his own way. But if money is an issue, if future security is important, it's not blasphemy to say that no one needs a TV, library cards are free, condoms are cheaper than kids, and a second (or third) job can offer a lot of peace of mind — it's not having money that causes stress, to me. You may disagree, but before you take me out and shoot me, please explain how living without fast food, Nintendo, and American Idol is going to shorten my lifespan from stress.

  • I do have a habit of being too flip with my comments some time, so let me clarify that I'm not saying we don't need a social safety net. Yes, sometimes people lose their savings through no fault of their own. Social Security is important to our society, and I'm sure it won't go away.

    But you can easily find out what your Social Security benefits will be. If that's all the income you want to have in retirement, then go ahead and spend everything you make to support your current lifestyle. But don't say you weren't warned when you can't continue that lifestyle after retirement.

    There are, broadly speaking, four possible sources of post-retirement income. Social Security, pensions, your own savings, and working. Social Security is the only one that's guaranteed by law. Most of us can't count on a pension (I know I can't). Working late in life may not be an option due to physical or mental health, or the state of the economy. So the best thing for you to count on if you want an income higher than basic Social Security is your own hard work and thrift while you're still in your prime earning years. Verbum sap.

  • You know it's real easy to look up the mountain and say how easy a climb it will be, but having gotten 3/4 the way to the summit and stumbled over roots and boulders of divorce and miscellaneous financial problems that accompany trying to have a family, I can tell you that it's not that simple.

    Sure you can eat bark chips and drink your own piss. You die after living a lonely and empty life if you are going to say "I" was a hermit that lived within my means in my tree in the woods. I haven't had a car loan in 20 years, have forgone going into debt with a big house and all the outrageous expenses involved, and am a serious homebody.

    I chose a career I would be happy doing, not one I was going to get rich in…I know now that was a mistake, to support myself in old age my best route was to be a sheeple and maximize my economic productivity at the expence of my personal happiness. I should have been a chemist and made meth like that show "Breaking Bad". Instead I am an entomologist trying to save lives from mosquito borne disease. It's not too late…

  • Some of you seem to be overlooking points made by comrade x (most notably) and others. The modern, global economy is hinged on two elements: consumerism and debt. Capitalism is relatively simple in these regards: the more you save the smaller your disposable income the more your propensity to consume decreases. Consumerist economies are like a house of cards, our current economic woes are due to this in part: as more money is saved, fewer goods and services are purchased. As banks make acquiring credit increasingly difficult, fewer goods and services are purchased. Etc., etc. There are other ways to jump-start economic growth, but they might not be effective and the bipartisan neoliberal establishment sure ain't so fond of them. Moreover, should workers everywhere be saving more when and where available? Absolutely. However, as others have mentioned, this is not an option for many for a litany of reasons. The current economic workings often mean consumers go into debt on purchases no longer just on wants but also for needs. E.g., medical care while un/underinsured, refinanced mortgages, et al.

  • Entomologista says:

    Do you know people who would reply with a hearty "Fuck THAT" if asked to cut off their cable, sell their cars, stop having their hair streaked, live in a trailer, drop Netflix, cut up their credit cards, and save that money instead? I do. Are we really fucked if we're not prepared to save money? Sure, but it's by choice for many. Not all, but many.

    Yes, I've heard all about the moral failings of poor people who do silly things like have a car they use to drive to work.

  • Bugboy, making a decent amount of money and being happy are not necessarily mutually exclusive.

  • Planting corn is also "divining the future" then.

    One argument is that the difference between gambling and investing is the time element. Planting corn and harvesting the ears some months (usually about 3) later is the process. And often there is sweat as well as $ involved in some enterprises.

    Gambling is usually much more immediate with that ol' Stimulus-Response thing going on. That's why some people find the jazz of gambling so damned addictive. Gambling is an attempt to short circuit the Great Law of Sowing and Reaping where that healthy time lapse between seed time and harvest is eliminated.

    And what most people call gambling is usually a zero sum game while there can be wealth increase with investing. The seed corn I plant has say a 100x return that I can eat, sell, or give to others.

    I think long positions in the stock market or funds that take long positions can be argued as investments. IMO every investment vehicle that moves away from that position approaches gambling. For me, there is no doubt that something like commodities trading and various forms of arbitrage are straight up gambling. In those trades you have winners/losers right now with no net wealth produced.

    I realize (and have been shown hereabouts) to be a Trog.


  • Woe be to any nation that can't provide the following:

    1. Care for children
    2, Care for the elderly.

    For millenia, this was the basic standard of any society. We take care of the young and infirmed as a matter of survival. It wasn't until the modern economy that we decided that our families were essentially just stepping stones on our path to success and that the government would take care of our parents if they got sick and we could just go on with our minivan lives as if nothing ever happened.

    Well, guess what, we're now living in a vastly different place. It may not be in our interest to uproot and move across the nation to have yet another temporary job,. Maybe I need to downsize my lifestyle and tell you pricks to fuck off.

    Our national obsession with the trappings of wealth have derailed a tremendous number of people that still assume the reality of their parents' generation. The housing bubble has now (thankfully and horribly) popped so that people who have regular, middle of the road jobs, could conceivably own a house someday.

    The fundamental problem with the retirement scenario at the moment is that :
    1. We have abandoned pensions as the gold standard.
    2. 401Ks are a poor substitute
    3. Despite what the boomers tell me about my immortality, in my mid 30's, I'm already starting to feel the effects of age.

    While everyone fails to believe it, age discrimination is rampant in this country and for one hugely obvious reason – health care expense. Without that, the wisdom and experience of age would outmatch youth and enthusiasm, at least most of the time. For every boomer you see at a $500 cheap seats concert to see the fucking Eagles, there are 100 that are scared shitless about the future. They were the unfortunates who got canned in their late fifties and can't find another gig that suits them until they die.

    My only hope is that the Gen X-ers see the light and demand change. America is a wonderful nation that would be 100X better if we actually cared about our neighbors.

  • It wasn't until the modern economy that we decided that our families were essentially just stepping stones on our path to success and that the government would take care of our parents if they got sick and we could just go on with our minivan lives as if nothing ever happened.

    That wasn't actually the reasoning behind government pensions. "We" (actually Europeans of the late 19th century and Americans of the 1930's) created retirement support to help the elderly. It wasn't supporting your elders that was a threat to people's prosperity, it was having to rely on your descendants. Social Security and their European predecessors were designed, and supported by the public, as something to help the older citizens live better lives, not as a relief on the burdens of the workers.

  • ladiesbane: "Sorry, Bob: one reason we lived four generations under the same roof was that the old folks approached triple digit ages — possibly because they didn't drink, smoke, live on fast food, or sit on their asses for business and pleasure."
    I beg to differ. Go here and see how from 1850 to the present life expectancy has doubled.


  • Bob and ladiesbane can both be right. Average life expectancy includes child and infant deaths, epidemics, women who died in childbirth, and deaths from nature or violence on the frontier. But someone who made it to age 40 was pretty likely to live a long time after that.

    If you get a chance, take a look at some of the old cemeteries in New England towns. You'll see many children who died before age 10, and a good number of people who lived into their 80s and 90s. All those youthful deaths were what was bringing the average down.

  • ladiesbane says:

    Bob, I was referring to my own grandparents and great-grandparents, and not broad trends. I do believe that being physically active throughout the day (not metering out an hour at the gym), not drinking or smoking, not eating processed foods, and not being exposed to chemical nastiness did prolong their lives. Not everyone is cut out to be a farmer in the northern Rockies (I know I'm not) but it is good for the health. Industrialization and urban life may offer financial advantages, but not health advantages.

    Entomologista, can you not hear me saying that there is a difference between necessary expenses and unnecessary ones? If you need a car to work or survive, it's obviously not unnecessary. I am not sneering at the poor for needing shoes. I'm also not arguing for a utilitarian absolute. But I know a lot of people who make very little money, are fearful about money and security, and who spend their comfort margin to zero each month (or run up their credit cards) on mani/pedis, Friday happy hour, the latest crap on iTunes, the odd bag of weed, lunch out while shopping (and shopping every weekend), Netflix, the new mystery hardback, etc., and do feel that "Hey, I work hard, I deserve to have a little fun" means, "I should be able to spend as much as I want on whatever I want because the only alternative I can imagine is sitting at home crying because my hair is so mousy."

    It's their money — I don't care if they spend it all on bubblegum — but it's hard to empathize when they face money crunches. Please believe me when I say that I am not including you in this group, and that I know the difference between need and greed.

  • "the odd bag of weed" is actually a pretty good investment — sure beats playstation. (and thanks to john prine.)

    as for on-topic, this country gets what it deserves. We act like dicks, so the dicks are king of us.

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