Retirement Crisis: America’s 401(k) accounts are miserable failures

The stock market is on a roll: the Nasdaq is in dot-com bubble territory, the S&P 500 posted a record year in 2014 and the Dow Jones is performing quite well. We can’t forget the billions of dollars Wall Street has been getting through the means of quantitative easing and record-low interest rates.

If the stock market is doing well then how come the nation’s 401(k) are a “crashing failure”?

According to a CNBC analysis using data from the Employee Benefit Research Institute, these retirement account vehicles aren’t protecting investors from any financial struggles during their winter years. Reportedly, the median amount in a lot of 401(k) accounts is just $18,433 and about 40 percent of workers have less than $10,000 in these accounts.

Would this be enough to live on for 25 to 30 years? For the average person, probably not.

This is creating a picture of millions of workers retiring from the labor market without an adequate supply of funds to pay for their retirement. What happened? Well, there are four things to consider, says the business news network:

• Workers aren’t contributing as much as they used to.
• Defined benefit plans have started to disappear.
• High 401(k) fees are making accounts 20 percent less.
• Sponsors and contributors make poor financial choices.

When 401(k) accounts were first launched in 1978, these retirement tools ballooned to $4.5 trillion by the third quarter of 2014.

A retirement crisis will only exacerbate. Social Security and Medicare are on the brink of insolvency and a large number of U.S. households are living paycheck to paycheck. The national savings rate is in paltry single digits and interest rates lead to nothing returns. There doesn’t seem to be any solution to today’s financial crisis in retirement.

The CNBC report seems to call for defined benefit pensions, but here is the reality of the situation: SS and public and private defined benefit pensions are out of money.

Ostensibly, many in retirement will turn to a reverse mortgage to fund their golden years. Of course, with millennials not purchasing properties, today’s generation won’t even have that option in their own retirement. Perhaps everyone will just work until their body is buried in the ground.

This is one of the unintended consequences of the Social Security pension system: instead of saving for retirement on your own, many decided to just depend on SS for the rest of their remaining years.