AEIdeas

The public policy blog of the American Enterprise Institute

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Discussion: (5 comments)

  1. A puzzle. I see other references that IRA/401k balances are insufficient to support retirements. Lots of wealthier folks are converting pretax retirement money to Roth IRAs. Is that scored as IRA income?

  2. Income taken out of 401K rollover IRA’s should go up as boomers hit age 70.5, when they are required to take Required Minimum Distributions. I retired at age 63.5, and so far, we have been able to get by without tapping the IRA. Most people in my income strata depend on a mix of Social Security, pensions (if available), and their 401K. At least in the company I worked for, the 401K was never touted as a stand alone solution for retirement.

  3. Somnolence

    They also don’t count substantial bank savings many have accumulated to the point they can make regular monthly withdrawals from, continuing to deposit something like SS payment into an ira until age 70.5.

  4. While 401(k)s are an important and growing part of the retirement system, they are not the sole or even predominant source of income for today’s retirees. Suggesting that 401(k)s are the failed patch in the quilt of retirement security is misleading.

    The true picture shows that Americans depend on retirement income from a variety of resources. The Baby Boom is no exception. Rather than being “the 401(k) generation”—which implies they spent their full career in a 401(k) world—Boomers are a transitional generation who have experienced a mix of pension coverage during their working careers. Today’s 60- to 62-year-olds typically entered the workforce in the early 1970s, a decade before the introduction of 401(k) plans. For these individuals, for much of their careers, 401(k) plans represent a supplemental component of their retirement accumulations.

    To evaluate the 401(k) system fairly, consider what a full career with 401(k) plans might generate for future retirees. Joint ICI research with the Employee Benefit Research Institute found that more than 60 percent of today’s 401(k) participants in their late 30s to mid-40s, who will turn 65 between 2030 and 2039, will accumulate enough in their 401(k) accounts to replace more than half their salary. Other studies have come to similar conclusions.

    Retirement security is a career-long race that must be won paycheck-by-paycheck—and 401(k)s will help Americans achieve their retirement goals.

  5. Hi everyone
    I always wondered why do we have to have a required min dist on the 401 (k) plans. It seems like a real pain, and nasty tax trap.

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