Straightening Out the Facts on the 401(k)

Posted on Sep 16, 2011 by  in 401(k) Retirement Planning, In the News, Retirement Readiness

Recently the Star Tribune published an article by Steve Early called “Pension changes create labor strife” that attacks 401(k) plans as inadequate vehicles for retirement readiness. Early insisted that 401(k) plans have been “wrecked” over the last three years due to market volatility.  Is that really true?  The answer is no – 401(k) plans have NOT been wrecked unless the investor pulled out of the market.  Period.

What's your reaction to the drama on Wall Street?

Early shared a study from The Wall Street Journal stating that “only 8 percent of all households approaching retirement have a 401(k) balance of $636,600 or more that’s needed to generate an income of $40,000 a year.”  This statistic simply shows that individuals are NOT planning adequately.  This is not the 401(k)’s fault. Every day we see 401(k) plans that are successful at providing meaningful retirement benefits.

The transfer of responsibility from the employer to the worker is not necessarily a bad thing.  401(k) plans allow workers to take control over their own retirement readiness and provide portability when they change jobs.  Each individual worker presumably knows the most about his or her financial situation and is best suited to evaluate what he or she needs to save in order to retire successfully. We encourage everyone to speak with a financial professional to help them meet their retirement goals.

What are you doing to make your 401(k) plan successful?

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