The Wall Street Journal is reporting that the median household headed by a person aged 60 to 62 with a 401(k) account has less than one-quarter of what is needed in that account to maintain its standard of living in retirement.
Using data from compiled by the Federal Reserve and analyzed by the Center for Retirement Research at Boston College, it shows most 401(k) participants do not have sufficient savings for retirement. Facing shortfalls, many people are postponing retirement, moving to cheaper housing, buying less-expensive food, cutting back on travel, taking bigger risks with their investments and making other sacrifices they never imagined.
“Inevitably, we find that, for the average person, there is not enough there,” says financial adviser Paul Merritt of NTrust Wealth Management in Virginia Beach, Va., who has found himself advising many retirement-age people with too little savings. “The discussion turns out to be: What kind of part-time work do you want to do after you retire?”
This analysis uses estimates of 401(k) balances from the end of 2010 and of salaries from 2009. It assumes people need 85% of their working income after they retire in order to maintain their standard of living, a common yardstick.