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Will You Outlive Your 401k Savings?

Can you outlive your 401k? According to a White Paper study released by the World Economic Forum (WEF), “We’ll Live to 100 – How Can We Afford It?” the answer is a definitive NO! To use a popular idiomatic expression from New England, “you can’t get there from here”. To put it bluntly, there is a crisis of epic proportions looming on the retirement horizon.

Even considering contributions from government programs such as Social Security, the overwhelming majority of US citizens will outlive retirement savings, many within a decade into a 30-year retirement.

Since the middle of the last century, life expectancy has been increasing rapidly, this is not new news. On average, it has been increasing by one year; every five years (see Figure 1). Babies born today in 2017 can expect to live to over 103, or in other words, they will live to see the year 2117. That could mean almost 40 years of retirement.

 

 

Over the past three decades in the US there has been a tectonic shift from defined benefit plans (or the traditional pension) to defined contribution plans such as 401k, IRA and Keogh plans. This shift has placed the burden of savings and investment selection to an unprepared and undisciplined public. And in 50% of cases, workers do not have access to any company-sponsored retirement plan at all.

From the public and private defined benefit pension sector, the number of underfunded pensions has reached historically high levels, presaging a massive shortfall in payments to retirees. Estimates of pension funding shortfalls are as high as $5 Trillion according to Forbes.

Jump to the study from the Economic policy institute, which says that the mean retirement savings from all working families (workers age 32-61 years old) is $95,776. Assuming a retirement age of 67, which means that most retirees will need over 30 years of savings from which to draw from, that equates to $3192.53 per year available for retirement or $266.04 per month. Yikes.

Unfortunately, that is not the worst part, according to the report:

“But that number doesn’t tell the whole story. Since so many families have zero savings and since super-savers can pull up the average, the median savings, or those at the 50th percentile, may be a better gauge. The median for all working-age families in the U.S. is just $5,000.”

Worldwide, the WEF projects that the retirement savings gap will reach $224 Trillion by the year 2050. The gap is widest in the US according to the report. By 2050, the gap in retirement requirements and saving are projected to reach $137 Trillion from the present $28 Trillion.

Timothy Kelly
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Timothy Kelly

Tim Kelly is the Founder of ForexTV. Since its inception in 2003, ForexTV has been a global leader in forex news and has expanded its news coverage to multiple industries. ForexTV is now one of the most recognized brands in global financial news. Mr. Kelly was also the creator and co-founder of 401kTV where he served as Managing Editor until April 2017.

Mr. Kelly is an expert in online marketing, search engine optimization, content development and content distribution. He has consulted some of the top brokerages, media companies and financial exchanges on online marketing and content management including: The New York Board of Trade, Chicago Board Options Exchange, International Business Times, Briefing.com, Bloomberg and Bridge Information Systems and 401kTV.

He continues to be a regular market analyst and writer for ForexTV.com. He holds a Series 3 and Series 34 CFTC registration and formerly was a Commodities Trading Advisor (CTA). Tim is also an expert and specialist in Ichimoku technical analysis. He was also a licensed Property & Casualty; Life, Accident & Health Insurance Producer in New York State.

In addition to writing about the financial markets, Mr. Kelly writes extensively about online marketing and content marketing.

Mr. Kelly attended Boston College where he studied English Literature and Economics, and also attended the University of Siena, Italy where he studied studio art.

Mr. Kelly has been a decades-long community volunteer in his hometown of Long Island where he established the community assistance foundation, Kelly's Heroes. He has also been a coach of Youth Lacrosse for over 10 years. Prior to volunteering in youth sports, Mr. Kelly was involved in the Inner City Scholarship program administered by the Archdiocese of New York.

Before creating ForexTV, Mr, Kelly was Sr. VP Global Marketing for Bridge Information Systems, the world’s second largest financial market data vendor. Prior to Bridge, Mr. Kelly was a team leader of Media at Bloomberg Financial Markets, where he created Bloomberg Personal Magazine with an initial circulation of over 7 million copies monthly.
Timothy Kelly
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