U.S. News & World Report, August 18, 2008
Emily Brandon writes that a new analysis says 401(k)’s are an inefficient way to finance a secure retirement.
The nonprofit National Institute on Retirement Security calculated that a 62-year-old with a final salary of $50,000 would need to have $550,000 in a 401(k) to have an adequate retirement income, determined by the authors to be $26,684 a year. To achieve the same income, a traditional pension would need to have only $355,000 set aside for that worker, nearly $200,000 less.
Three reasons that traditional pensions need less funding than 401(k)’s:
No oversaving. Allocation stays constant. Higher investment returns. Read the full article here.