The Average Retirement Account
Everyone's retirement situation is different. Some people have saved and invested diligently for retirement and amassed a small fortune. Others have seen their funds depleted by the vagaries of the financial market, or through hardship withdrawals. Still others have not saved much at all. But there are some basic retirement planning commonalities that most of us share.
Other People Are Reading
-
Defined-Contribution Plans
-
More workers than ever before are relying on defined-contribution plans rather than defined-benefit plans, also known as pension plans. Pension plans require an annual pre-tax contribution, which is then invested in stocks, bonds, and other financial instruments. The benefits you receive at retirement age are based on your years of service, and are fixed regardless of how well the assets have been invested by the pension administrators. The firm or government agency must contribute its own funds if a pension fund lacks the assets to pay full pension benefits. This can make pension plans exceedingly expensive. For this reason, most organizations have phased out pension plans in favor of defined-contribution plans such as 401ks.
Underfunded Retirement Accounts
-
Most people do not contribute enough to their retirement accounts. According to Fidelity Investments data cited in "The Miami Herald," the average 401k retirement account holds just over $65,000. This figure, of course, varies when one takes into account a variety of factors, such as age and income. However, according to the latest Congressional Survey of Consumer Finances, the median 401k balance of those 65 and older is under $61,000 dollars. Not everyone can afford to contribute the maximum to their retirement accounts, but it is critical to contribute as much as possible.
-
Rising Health Care Costs
-
Many firms once included guaranteed health care benefits for their former workers if they had worked at the firm long enough. However, with rising health care expenses, and with retirees living longer now than in previous decades, this benefit has been cut at most firms. This means that retirees must provide for their own health care, an increasingly expensive proposition that requires them to ensure that they save as much as possible in their retirement accounts to fund medical expenses. Also, try to stay healthy to minimize your long-term medical expenses.
Increasing Retirement Age
-
Given the turmoil of the financial markets and underfunded retirement accounts, it is often necessary for individuals to work longer than they had anticipated. More and more, seniors are opting to keep their full-time jobs for longer periods of time to increase their savings and hang onto their medical benefits. The average retirement account cannot fund an extra 20 to 30 years of living unaided. Further, those seniors who have retired often find it necessary to find part-time work for both the funds and for subsidized health insurance.
-
