Are 401(k)s Really Going to Let You Retire?

[tim114]

I am currently retired and receiving money from a State defined-benefit pension. I also have some money in a 403b account, which I funded for 18 years.

Here is my concern. Even if I funded it for all 33 years of my career (not possible, since tax laws weren't in place), there would be no way I could live in New Jersey on the income. So how are all these people supposed to retire on their 401(k)s? At the time of retirement, one would need at least $1,000,000 in his account invested very conservatively. And that would get you what? Maybe $30,000 per year before taxes. How is this supposed to work?

Wall Street loves it, because they get to gamble with our money. Government loves it because it appears they are helping us out. Of course, government hasn't done very well helping us with Social Security.

Tim

 

[jtdestin]

New Jersey is one of the more unfriendly states to live in as far as taxes and that’s a shame. you could retire for that in a state like Texas, Florida, Tennessee and few other low tax states were there’s no income taxes. My mom is living on less in Florida. New Jersey is a great place I have visited a few times and loved it …Cape May is one of my favorite places… but not the place to retire unless your loaded.

check this site out
http://money.msn.com/retirement-plan/best-worst-states-for-retiree-taxes-kiplinger.aspx?page=2

 

[juanjo]

Social Security was never intended to provide all the money one needed to live on when they retired. Look up the legislative history and information on it.

At one time companies had defined pension plans which would guarantee a worker a pension to live on when they retired. Those have gone by the wayside. Ira's and 401k's were put into place to replace them. How much you get out depends on how much you put in. Unfortunately far too many people did not have these available to them at an early enough age or if they did, they simply did not take advantage of them or minimally funded them which is going to back fire on them when they are ready to retire.

 

[tim114]

All good points as usual. However, my concern is how people are going to put enough money into their retirement accounts when they are living pay check to pay check. I don't think my estimate of $1,000,000 is too far off the mark. And my next concern is where does one invest this money safely so it can grow over a 30-40 period of time.

Government can't do it. Companies want out. So how is an individual going to win in this game?

Tim

 

[gremlin2k08]

Personally I feel mutual funds are a good option for the more conservative invester. I also HIGHLY suggest talking with a financial consultant. Edwards Jones is an amazing people friendly company in my area. Many of these companies even offer free consultation. It is really important to prepare and to be as informed as possible. So I also suggest reading up on the different types of options and plans that may be available for u. And it is difficult to make the best choice for your future. Many people do live on a very limited budget. BUT i have seen in many cases that people tend to spend money they could easily save on luxeries that they may not see as a luxery. Buying name brand over generic is an example(granted quality is of course a factor). Its little things that can really make a difference in you life and your future. Hope this was of some help.

 

[juanjo]

I agree with gremlin. Unless you have the skills and time to pay the attention to investments using an investment firm which specializes in managing people's funds is the way to go. As for figuring on needing a million to retire, I would say that is the low end of the scale. You should figure on needing around 80% of your present income to live on when you retire just to maintain your present standard of living. Also figure on inflation and life span as issues in your estimate. There are websites you can go to which will help you figure out how much you will need in order to retire when you want to do so. Most investment company websites have them in an area you can access for free.

The simple hard truth is that if you wait until you are in your 30's you are not going to have an easy time of it. But even if in your 30's 40's or 50's starting now and putting away as much as you possibly can is going to make it easier later on. My parents both worked after my father left the Navy. They saved my mother's salary and invested it in mutual funds while living on my father's salary. It was not easy for them but it was worth it for them. The money they saved over the years is what they are living on now and doing so quite comfortably.

I was always confused when I worked for my former firm. They offered a 401k in which they matched what their employees put into their accounts up to 5% of the employees salary. So if you put in 5% of your salary the company put in 5% which doubled your investment - found money as far as I am concerned. But lots of people passed on it, especially the younger people.