Don’t be like these people. They will be wards of the State.

Fidelity Investments released results from a 401(k) study a few weeks ago.  Fidelity is one of the largest investment companies in the US.  The huge number of people in the survey are a representative sample of the US investing population.  The results of the survey are ominous.  The average Fidelity 401(k) account balance was $71,500.  The article touted this as a positive development, but I don’t see it that way.  These people will be wards of a failing State that can’t deliver its welfare/retirement promises.

Social security and Medicare are huge ponzi schemes.  Please read the free introductory chapter of Tom Wood’s new book Rollback to get a succinct overview of the coming government default.  Type your email and they will email you a PDF file of chapter 1.

$71,500 invested in a high dividend stock portfolio averaging a 6% yield would generate $4,290 in income minus extortion (taxation).  They might get some social security money.  Let us assume a monthly benefit of $1,200 from social security and no pension money.

$1,200 social security (pre-tax) + $357 (monthly high dividend pre-tax) = $1,557 per month pre-tax income.

The average 401(k) account holder is screwed.  They will be forced to accept a much lower standard of living, reverse mortgage their home, and/or move in with some of their children.  There is no way someone retiring today at 65 years of age with $71,500 in their retirement account could not live off of their savings for 20 years.

Let’s assume for a moment that those closest to retirement have twice the average Fidelity account balance.  How much better off are they?  They would have an account balance of $143,000.

$143,000 in their 401(k) x 6% dividend yield = $8,580 per year dividend income or $715 per month

$1,200 social security + $715 dividends = $1,915 per month income.

Yikes!  Can you say Wal-Mart greeter?  These people will not be able to retire on an income of $1,915 per month.  Keep in mind that most people are not putting together high dividend stock portfolios earning over 6%.  The S&P 500 index is only providing a pathetic 1.71% dividend yield recently.  These people will be devastated by the Federal Reserve’s price inflation.  The money supply and later prices will skyrocket when the commercial banks lend out the over one trillion dollars in excess reserves.  Retirees are on fixed incomes.  They will be crushed by price inflation.

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Fidelity Study Finds 401(k) Account Averages in 2010 Reached 10-Year High

Posted in 401k, Financial News, Retirement

February 23, 2011

The average 401(k account balance showed a significant increase at the end of 2010, according to a new study released by Fidelity Investments. On average, accounts held $71,500 during the year, which was the highest average account balance revealed by Fidelity in 10 years.

Accounts Up 11 Percent from 2009

Fidelity Investments had a lot of positive numbers to share regarding the increases in 401(k) accounts. One great bit of data was that, for the 17,000 employer-sponsored defined contribution plans and their 11 million participants, the average balance of their retirement accounts rose 11 percent over the average balance in the fourth quarter of 2009.

Even better was the fact that after 401(k) accounts took a huge hit from the financial crisis, some even losing more than half of their balance in 2008 and 2009, they managed to increase 7.65 percent over the accounts in 2000 that averaged $54,700.

According to the study, about two-thirds of the increases seen were driven by market performance while one-third increased thanks to participant actions such as contributions. The Standard & Poor’s 500 Index increased by about 13 percent last year, and according to the study, workers deferred an average of 8.2 percent of their salaries.

Continuously-Active Accounts Tripled Over the Decade

The report also found that savers who were continuously-active, meaning they were employed by the plan sponsor and had a balance for the entire decade, saw their plans triple during that time. The average 401(k) balance increased from $59,100 in December 2000 to $183,100 in December 2010.

One reason account averages increased was because most participants continued to contribute to their plans through the financial crisis and fought against withdrawing funds or borrowing from their plans.

In fact, four out of five savers didn’t take a loan from their plans last year and only 33 percent cash out when leaving a job. Most people found that keeping money in their plans was the best way to ensure they would have money available once they retire.

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Published in: on March 8, 2011 at 12:57 pm  Leave a Comment  

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