The Grasshopper and the Ant and their 401(k)s.
I am startled by some figures quoted by Selena Maranjian at the Motley Fool. She quotes from a 2006 Retirement Confidence Survey (RCS) that shows across all age bands of working aged people, almost 53% have less than $25,000 in retirement savings. It gets worse, broken down by age, almost 42% of those 55 and older have less than $25,000. Of course, some of those people have defined benefit plans that may not be included and perhaps even assets not defined as retirement savings. However, those contributors have got to be insignificant compared to the big takeaway from the study: Americans are not saving enough to fund their retirements.
Social Security will not be enough, even if Social Security as we know it survives to my probable retirement, people are still counting on it. What also stands out is the alarming number of people, over 60%, expecting retirement benefits from an employer although only 40% actually participated in a plan. Somebody needs a reality check.
The study quoted (emphasis mine):
Now, of course, we all could look at our own 401(k)s or pension plans and feel comfortable about where we are heading, if we are like the ant in the fable. But I'm not here to worry about my retirement account.
The grasshopper and the ant. The problem, I think, will arise when those who, like the grasshopper in the fable, did not save and will be in want for retirement. Lawmakers (mostly Democrats) will hue and cry about the "social contract with America" and the broken Social Security system, and the greedy few who hold all the money. At some point, these cries will demand action from their government, meaning increased taxes to fund benefits from those "ants" who worked hard and saved (that's probably already in the cards anyways).
I'm fully expecting that the younger generation of ants will have Social Security benefits taken away; certainly those who were exceedingly thrifty are probably out of luck in any event. I can see a day where qualification for Social Security will be tied to total asset base rather than your current means of earning, in effect commandeering your 401(k) as part of the Social Security system--the only benefit being that YOU are guaranteed to receive what you put in (up until lawmakers decide to start figuring out how to take that, too).
Let's just do away with this farce right now and allow workers to opt out of the Social Security system--in exchange for no more tax payments on my part, the government will no longer have to worry about me or the rest of the ant colony.
Social Security will not be enough, even if Social Security as we know it survives to my probable retirement, people are still counting on it. What also stands out is the alarming number of people, over 60%, expecting retirement benefits from an employer although only 40% actually participated in a plan. Somebody needs a reality check.
The study quoted (emphasis mine):
The RCS continues to find that one-quarter of workers are very confident about their financial security in retirement (24 percent), while more than 4 in 10 are somewhat confident (44 percent). However, at least some of those who say they are very confident may be overconfident. Twenty-two percent of very confident workers are not currently saving for retirement, 39 percent have less than $50,000 in savings, and 37 percent have not done a retirement needs calculation.Clearly, America is not realistic.
Now, of course, we all could look at our own 401(k)s or pension plans and feel comfortable about where we are heading, if we are like the ant in the fable. But I'm not here to worry about my retirement account.
The grasshopper and the ant. The problem, I think, will arise when those who, like the grasshopper in the fable, did not save and will be in want for retirement. Lawmakers (mostly Democrats) will hue and cry about the "social contract with America" and the broken Social Security system, and the greedy few who hold all the money. At some point, these cries will demand action from their government, meaning increased taxes to fund benefits from those "ants" who worked hard and saved (that's probably already in the cards anyways).
I'm fully expecting that the younger generation of ants will have Social Security benefits taken away; certainly those who were exceedingly thrifty are probably out of luck in any event. I can see a day where qualification for Social Security will be tied to total asset base rather than your current means of earning, in effect commandeering your 401(k) as part of the Social Security system--the only benefit being that YOU are guaranteed to receive what you put in (up until lawmakers decide to start figuring out how to take that, too).
Let's just do away with this farce right now and allow workers to opt out of the Social Security system--in exchange for no more tax payments on my part, the government will no longer have to worry about me or the rest of the ant colony.
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