Why you won't retire early
The latest reading on how much we’re saving for retirement shows the average 401K plan is at a record high-- $91,300 at the end of 2014. Fidelity Investments-- the biggest 401K provider-- says positive economic conditions boosted savings. The bad news-- despite last year’s stock market gains when the S&P 500 climbed more than 11%, the typical 401K only rose 2% from 2013.
Yahoo Finance’s Jeff Macke thinks we shouldn’t be surprised at such paltry returns.
“Individuals are historically terrible investors,” he says. “And people continue to pick stocks and try all kinds of crazy ideas and they don’t consider the fees of some of these mutual funds or ETFs that they’re buying.”
Fidelity adds that Americans put more money away in 2014 than they did since 2011. Macke notes that while that’s nice, savings just won’t keep up with the changes in life expectancy.
“We’re going to have to get realistic about retirement age,” he argues. “We came up with the retirement age of 65 when people used to live until they were about 59. That seems to have changed in the ensuing 70 years…now we’re all living until we’re 90.”
Get the Latest Market Data and News with the Yahoo Finance App
Macke believes we have to face the fact that for many of us, we won’t be able to afford just kicking back and putting up our feet at a young age.
“You’re not supposed to be allowed to retire for 35 years or 25 years and just sit there and do nothing,” he says. “You have to work longer and save more. The equation is relatively simple.
Whether you call that a crisis or just an unpleasant fact of life, it is what it is.”
And Macke notes that while Fidelity says it continues to see Americans taking positive steps towards saving for retirement, it will take a lot more in our 401K accounts to wave goodbye to the working life.
“$91,000 is a nice start,” he says. “But unless you plan to live in a shed for 30 years it’s not going to do it.”
