Written on behalf of the PlushMoney Impact program by Shelby Sims
Feeling quite ambitious this morning, I pulled up some of PlushMoney’s personal finance videos to go along with my breakfast. For some reason, the retirement plan section caught my attention #401K<3. While listening to the explanation on how money builds on itself in retirment plans, I began to wonder if it is really true that the younger generations (GEN X) will reap less benefits following the Baby Boomers’ transitioning into retirement!? To find my answer, I jumped over to google. What I found were two very interesting articles, CNBC’s, “Will Baby Boomers Bankrupt Social Security?,” and Wall Street Journal’s, “Retiring Boomers Find 401(K) Plans Fall Short.” Below I listed what I felt to be the highlights out of both reports.
“Will Baby Boomers Bankrupt Social Security?”
•yes, there is “a fear that Boomers will trigger a collapse of Social Security,” “there is currently a large surplus, but it will be drained by the year 2037. At that point, Social Security will only be able to pay out 75 percent of its benefits”
• Congressional Budget Office “gives the system another 10 years before it begins to fall apart”
•”Social Security is funded mostly through payroll taxes, with present-day workers funding the payouts for retirees”
•*”As Boomers begin to retire, the huge group of people putting money into the system will begin taking it out of the system, which then will be funded by a generation of workers—the so-called Gen X—whose numbers are some 15 million fewer. The surplus of money paid into the system by Boomers will allow it to run into the late 2030s, even though it will begin paying out more than it takes in by 2017″
“Retiring Boomers Find 401(K) Plans Fall Short.
•”The median household headed by a person aged 60 to 62 with a 401(k) account has less than one-quarter of what is needed in that account to maintain its standard of living in retirement”
•” It assumes people need 85% of their working income after they retire in order to maintain their standard of living, a common yardstick”
•”a 401(k) also requires steady, significant savings. And unlike corporate pension plans, which are guaranteed by the U.S. government, 401(k) plans have no such backstop”