401(k)s Are NOT Replacing Social Security as the Main Source of Retirement Savings

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In an interesting article about the increasing number of workers who are withdrawing funds from their 401(k) plans, the Post told readers that "401(k) plans are replacing employer-sponsored pension plans and Social Security as the main source of retirement savings for many Americans." No, that actually is not true. The median wealth for late baby boomers (workers age 45 to 54) is around $170,000, with most of this being equity in their home. Even for workers in the second wealthiest quintile the median wealth is only $250,000, with roughly half being home equity. This means total non-housing wealth (including personal savings and family businesses, in addition to 401(k)s) will be around $125,000 for this group. By comparison, these households can expect around $20,000 a year in retirement from Social Security. Two-thirds of retirees receive the majority of their income from Social Security. The share of the population that will receive more of their income from a 401(k) plan than Social Security is relatively small.

--Dean Baker

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