401(k) Balances Increase But Are Inadequate for Retirement

People are putting more money into their 401(k) retirement plans but their account balances will not sustain them for a long retirement. According to 401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2005, a report from the Investment Company Institute (ICI), at the end of 2005 the average 401(k) balance was $102,014 compared to $67,585 in 2000. People in their fifties and sixties had averages balances of only $127,766 and $140,957 respectively.

These balances are scary. How are these people going to live on such inadequate savings? For example, at current money market rates of around five percent, $150,000 yields only $7,500 a year. Some bond yields are higher but not high enough to generate much more income. And stock dividend yields are much lower. Even with monthly social security payments these people will be strapped for cash unless they have other sources of income.

To ensure that have a financially secure retirement, begin an aggressive savings and investing program today. Make savings your first priority - save before you spend.

Related Articles:

Disciplined Saving and Smart Investing Will Increase Your Nest Egg
Eat Your Spinach: Spend Less & Save More (And How to do it)
Save a Little, Get a Lot

Posted March 30, 2007.