How much money is in your 401 (k) or similar DC plan?

[HVC]

I just started my RRSP recently, so $1200 lol. I do have 26k in tax free savings investments. It's kind of like a RRSP, but you can take money out without penalties.

[Jacob]

The biggest problem with 401k's is *not* that the ordinary participant lacks the required sophistication, it's that they don't put any money in or, like you said, take it all out before retirement.  That's not lack of sophistication, that's being a meathead.

I think your analysis is off base for a number of reasons:

1: It's not a matter of a lack of sophistication vs not putting enough money in; it's a matter of a lack of sophistication leading to not understanding the consequences of underfunding your retirement accounts, and thus not saving enough money.

2: Another significant driver of underfunding retirement accounts is is financial hardship. As MiM said, it's hard to meet the desired funding levels with even a few years of not contributing, and these days significant portions of the populace have had several lean years in their careers. This has nothing to do with being a meathead.

3: Finally, as a matter of social policy people being "meatheads" is irrelevant; if the population as a whole are unprepared for retirement, that's an indictment of the policies and incentives put in place by policy makers, not of the population.

[CountDeMoney]

The biggest problem with 401k's is *not* that the ordinary participant lacks the required sophistication, it's that they don't put any money in or, like you said, take it all out before retirement.  That's not lack of sophistication, that's being a meathead.

I think your analysis is off base for a number of reasons:

1: It's not a matter of a lack of sophistication vs not putting enough money in; it's a matter of a lack of sophistication leading to not understanding the consequences of underfunding your retirement accounts, and thus not saving enough money.

2: Another significant driver of underfunding retirement accounts is is financial hardship. As MiM said, it's hard to meet the desired funding levels with even a few years of not contributing, and these days significant portions of the populace have had several lean years in their careers. This has nothing to do with being a meathead.

3: Finally, as a matter of social policy people being "meatheads" is irrelevant; if the population as a whole are unprepared for retirement, that's an indictment of the policies and incentives put in place by policy makers, not of the population.

People who were forced to liquidate their retirement funds due to loss of employment to support their families or to fend off home foreclosures after 2008 are still meatheads, Jacob, as are the meatheads who don't have plans or don't contribute to them because they simply can't.  For fuck's sake, already.

[Admiral Yi]

I think your analysis is off base for a number of reasons:

1: It's not a matter of a lack of sophistication vs not putting enough money in; it's a matter of a lack of sophistication leading to not understanding the consequences of underfunding your retirement accounts, and thus not saving enough money.

2: Another significant driver of underfunding retirement accounts is is financial hardship. As MiM said, it's hard to meet the desired funding levels with even a few years of not contributing, and these days significant portions of the populace have had several lean years in their careers. This has nothing to do with being a meathead.

3: Finally, as a matter of social policy people being "meatheads" is irrelevant; if the population as a whole are unprepared for retirement, that's an indictment of the policies and incentives put in place by policy makers, not of the population.

1. It doesn't require "financial sophistication" to realize that if you don't put any in, you won't have any when you retire.

2. This is true, but hardly an argument for DB over DC, which was the starting point of the discussion.  And this effect is not limited to 401k's: you work for 10 years part time as a pool cleaner and your Social Security benefit gets fucked too.

3. Are there *any* decisions individuals are responsible for in your universe?  If I quit my job and start smoking crack full time who's responsibility is it?

[Savonarola]

Wow, even here my retirement pile is in the top 50% already.

I would have been surprised if you weren't in the top 50%.  I know how engineers are.  This is why I was so surprised by my co-workers.

[CountDeMoney]

Besides, vM married right.  She'll keep his ass on target.

[MadImmortalMan]

Honestly, I think the contribution limits are still way too low.

[OttoVonBismarck]

A 401k is a government created thing in any case, so the cries of "socialism" are irrelevant. The government created a special tax shelter, it can also mandate how they are used. I'm saying how I would regulate 401ks as they exist, an employer could still opt to have no 401k at all. If they did, that would make them a less attractive employer. Further, I'm not saying 401k reform fixes retirement concerns for everyone, but there is a huge portion of Americans who are pretty middle class and comfortable right now who are on a collision course with Fuck City, population 100m, because they don't understand what their 401k is, have never modified their investments, have never changed their contribution amounts (most plans default to some paltry 3% or something) and will retire in poverty. They do not see it coming, had no idea how they could have changed it, and have little hope of saving themselves. Then there are those who cashed theirs out to buy a boat or something or those who took out a bunch of 401k loans or etc who are a different level of misguided.

My proposals would help those who have 401ks, which is a lot of Americans a substantial portion of the middle class. No, it would not help out of work people or people who have McJobs--because those jobs do not provide 401ks. Those people are a separate issue, their plight shouldn't muddy the waters of 401k reform.

[Jacob]

1. It doesn't require "financial sophistication" to realize that if you don't put any in, you won't have any when you retire.

2. This is true, but hardly an argument for DB over DC, which was the starting point of the discussion.  And this effect is not limited to 401k's: you work for 10 years part time as a pool cleaner and your Social Security benefit gets fucked too.

3. Are there *any* decisions individuals are responsible for in your universe?  If I quit my job and start smoking crack full time who's responsibility is it?

1: But it requires financial sophistication to understand how much to put in, how to manage it, and grasping the consequences of the choice of putting more or less in when balanced against other options (home equity, educating children, paying down student debt, medical bills). See Otto's excellent post for more details.

2: I'm not arguing about DB vs DC, I'm arguing against this assertion that you made:

The biggest problem with 401k's is *not* that the ordinary participant lacks the required sophistication, it's that they don't put any money in or, like you said, take it all out before retirement.  That's not lack of sophistication, that's being a meathead.

I contend that the biggest problem with the 401ks is that they fail to provide the kind of retirement that are expected from them, and that there are no significant other structures in place to pick up the slack.

3: If you quit your job to smoke crack, that's your responsibility. If 100 million Americans all quit their jobs to smoke crack, then it's an indication that your economic and employment policies not to mention your drug and addiction management policies are severely failing. I'm surprised that's even a question for you.

Let me in turn ask you: are there any failed free-market policies where you accept that the policy was built on the wrong premise rather than blaming individuals for acting insufficiently like a perfect Randian Homo Economicus?

Seriously - if you're making public policy that leave hundred of millions worse off than they were before, individual responsibility is completely a moot point. Blaming individuals for making bad choices when you're excusing shitty free market policies is on the same level as blaming the people for being insufficiently rational or dedicated when making excuses for shitty socialist policies. If your policies leave significant number of people worse off then it's because your policies suck, not because the people failed you or themselves. If you have hundreds of millions of "meatheads", you need to make your policies such that "meatheads" aren't completely fucked over by the government, by business, or by themselves.

[Phillip V]

I max out a Roth 401k contribution each year and also accumulate "retirement points" towards a military pension via reserve and occasional active duty.

[CountDeMoney]

A 401k is a government created thing in any case, so the cries of "socialism" are irrelevant. The government created a special tax shelter, it can also mandate how they are used. I'm saying how I would regulate 401ks as they exist, an employer could still opt to have no 401k at all. If they did, that would make them a less attractive employer.

You could conceivably mandate how they're used, but that's not even remotely a realistic option.  Forcing them to do so would be government overreach to say the least.
And I don't buy the argument that a lack of offering a 401k plan is some sort of self-induced detriment to the employer.  Shit, Hopkins had absolutely no problem taking away their 403b matching contributions from us in 2009, and they've never come back.  Doesn't make them any less of an attractive employer. 

Further, I'm not saying 401k reform fixes retirement concerns for everyone, but there is a huge portion of Americans who are pretty middle class and comfortable right now who are on a collision course with Fuck City, population 100m, because they don't understand what their 401k is, have never modified their investments, have never changed their contribution amounts (most plans default to some paltry 3% or something) and will retire in poverty. They do not see it coming, had no idea how they could have changed it, and have little hope of saving themselves. Then there are those who cashed theirs out to buy a boat or something or those who took out a bunch of 401k loans or etc who are a different level of misguided.

Fixed 401k reforms for forcing employees to contribute at a specific level to enhance and at least try to ensure the survivability of their assets into retirement is a very good idea, but you're still putting those funds to risk to a volatile market.  That's partially the reason why so many 401ks have seen an erosion of cash in the last couple years, as investors put it into more tangible assets as foreclosed properties, short sales and other real estate options as an alternative.  Something tangible, as opposed to Wall Street's fake money on paper that has a tendency to suddenly disappear at the most inconvenient times.  And it's not like offering other products as alternatives within 401k plans would've helped in 2008, as everybody got whacked across the board.

My proposals would help those who have 401ks, which is a lot of Americans a substantial portion of the middle class. No, it would not help out of work people or people who have McJobs--because those jobs do not provide 401ks. Those people are a separate issue, their plight shouldn't muddy the waters of 401k reform.

Of course they shouldn't muddy the 401k waters; they don't contribute to Wall Street's income. 
But we're dealing with them separately for their lack of contribution, what with the eradication of pensions and the political drive to eliminate government safety nets.  But that, as Oprah would say, is for another show.

[alfred russel]

The biggest problem with 401k's is *not* that the ordinary participant lacks the required sophistication, it's that they don't put any money in or, like you said, take it all out before retirement.  That's not lack of sophistication, that's being a meathead.

Jake and CdM are all over this, so I don't mean to dogpile, but...401ks are one of the centerpieces of federal policy to encourage people to prepare for retirement. The issue is that it encourages people to start saving early, but penalizes them for ever dipping into the funds. In theory that is great, but in reality most 20 year olds are going to have several stretches of serious hardship before they hit 65 (illnesses, prolonged unemployment, elder care, maybe even just the birth of a child, etc.).

If that 20 year old makes it to 65 without bottoming out at least once, the system worked great for him: but he probably is fairly well off anyway. The majority of 20 year olds will bottom out at some point, and unfortunately for them the system will hit them with penalties and they would probably have been better off never hearing of the 401k.

We have a perverse system where the tax code is rewarding the people that probably "won" anyway, and penalizing those that tried to save but life got in the way.

Not to mention that the 401k benefit is directly tied to your marginal tax rate, so the wealthy benefit quite a bit more than the poor even if the poor never tap into the funds.

[Ideologue]

Significantly less than any of you, hopefully more than Ide and Raz.

Hopefully.

[Grey Fox]

There's 8000$ in my RRSP. My employer & I have put 6400$ in it, the rest is interest. I don't know if that's good or not.

[DGuller]

I'd like to see 401ks turned into something like that, too many options exist in 401ks and for 95% of people the options are bad because they aren't sophisticated enough to use them properly.