Half of American workers have no retirement plans through their jobs, leaving people on their own to save for old age.Meanwhile, four out of five private-sector workers with retirement plans at work have only 401(k)-type defined contribution accounts, rather than traditional pensions that pay retirees a fixed benefit for life. Numerous studies have found that workers with defined-contribution accounts often put aside too little money, make too many withdrawals or employ the wrong investment strategies to save enough for old age. Overall, people ages 55 to 64 have a median retirement account balance of $120,000, Boston College researchers have found, which is enough to fund an annuity paying about $575 a month, far short of what they will need.
Officials at money-management firms that handle 401(k)-type investments argue that the tools are in place for Americans to retire comfortably. The problem, they say, is that employers and workers are not using them correctly.
When Americans start to realize that they are responsible for their own retirement they may take their retirement plan more seriously. 401(k) plans were designed as a supplement to a pension plan. This is no longer the case. For most Americans the 401(k) plan has become their sole source of retirement.
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