F(*)ck a 401(k): The Popular Financial Planning Vehicle is Failing Americans

I’m no Suze Orman, but living for 65, feels like a bad gamble to me. Yesterday, I saw an article that said, Suze has declared 70 the new retirement age for Americans. Yay!

This is my logic speaking, but isn’t this type of retirement planning a risk?

The promise of wealth at retirement age is riddled with all kinds of uncontrollable risks, like market fluctuations, family challenges, job or industry changes, health issues, and untimely death.

I have a 401k, but I always felt like I was betting my future against change, time, and death, three guarantees that I don’t control. I had to ask myself:

Will I always be employed/employable?

Will the markets perform favorably for the next 40 years?

Will I always be healthy enough to work?

Will I survive long enough to retire?

Just today I read in an article on CNBC.com entitled, “Role of retirement plans in tax debate highlights how poorly Americans are saving for retirement.” Here is what it had to say:

Look at those numbers: the median value (half have more, half have less) of a 401(k) account for someone 65 and over is about $60,000. Let’s assume at 65 you’re going to live another 20 years to 85: $60,000 isn’t much to live on spread out over 20 years.

This is important because the other two “legs” of the retirement “stool”—Social Security and pensions—are increasingly under pressure.

As of January 2017, the average retiree receives $1,360 per month from Social Security. That’s $16,000 a year. About one-third of adults over 65 also collect a pension, but it’s not a large amount of money. The median private pension was only $9,376 per year, according to the Pension Rights Center (state, local, and federal pensions were higher).

Do the math. For those who collect Social Security and are lucky enough to collect a private pension, they collect roughly $25,000 a year.

And those are the lucky ones. Anyone looking to collect above that are going to need their personal savings. That gets me back to the 401(k). That $60,000 is roughly $3,000 a year assuming a 20-year lifespan.

Another article published today on Bloomberg.com entitled “Americans Are Retiring Later, Dying Sooner and Sicker In-Between” had an even bleaker outlook.

It had this to say about Baby Boomers, “Almost one in three Americans age 65 to 69 is still working, along with almost one in five in their early 70s.”

Are we millennials any better prepared?  I doubt it.

What if there was a better way?

There is.