Your Corporate Qualified 401k – Can You Retire On It?

We all know that the standard retirement plan today in Corporate America is a 401k. Gone are the days that the paternal feelings of a company could afford to take care of the employees after a 35 year career and paid for a pension for you for the rest of the employee’s life. The workforce is much more mobile and competition in the industries does not allow the cost of a pension plan in most companies. Today a stark reality has dawned and we realize that we are alone in our journey to find the final Holy Grail “Retirement”.

Can this retirement vehicle provide for our retirement? Here are some sobering statistics. If we were to save $ 1,000,000 in our 401k it would only provide us with $ 40,000 per year for our living expenses if we wanted it to last throughout out 30 plus years of retirement. Sadly around 43 percent of workers said they have less than $10,000 in savings in 2010. This number grew from 39 percent in 2009.

This statistic is the result of the following reality.

1) We do not start saving early enough. The average 22 year old with a two year tenure with an employer has only about $ 4500 saved in their 401k

2) The average worker in their 30’s has only about $ 11,500 saved in their 401k on an average two year tenure with the same employer

3) Many of the Trustees of your 401k plans do not really understand how their plan works and what is needed by their employees to create a sustainable retirement for themselves.

4) Many 401k’s are managed by insurance companies whose expenses are hard to determine.

5) The plans are often difficult to understand with revenue sharing, 12-b1 fees, and undisclosed fees, poor performance and few choices available to the plans.

We at Wales Investments can help you understand your plans, craft a plan that will work for your specific company’s goals and give your employees a benefit that will serve them in their retirement.

Call us at Wales Investments at 408-944-9176 for a complementary analysis for your company.

Source: Employee Benefit Research Institute