A new issue brief published by the Center for Retirement Research at Boston College finds that for working households nearing retirement with a 401(k), the median combined 401(k)/IRA balances rose from $135,000 in 2016 to $144,000 in 2019.
Though the economy has been overtaken by COVID-19 and the ensuing recession, the Federal Reserve’s 2019 Survey of Consumer Finances (SCF) still provides a useful update on how retirement account balances fared between 2016 and 2019, a period of solid economic growth, strong stock market returns and continued maturation of the 401(k) system.
“These balances may not differ much from today, as the market is modestly higher in 2020 and most job losses have been borne by those without a 401(k),” says the Brief.
While the retirement account increase is welcome news, the brief points out that $144,000 provides a married couple with only $570 per month in retirement.
The brief adds, “Part of that failure is due to the immaturity of the 401(k) system. This problem will resolve itself over time as new workers can be covered for their whole career. The other half of the problem, however, requires policymakers to mandate universal coverage. Employers must either provide a plan themselves or be required to auto-enroll their employees in a retirement savings program initiated by government. Burgeoning auto-IRA programs at the state level – in California, Illinois, and Oregon – are a first step down this path.