It’s not really clear if rising 401k balances as noted in this CNN/Money story are the good news it portends to be for the nation’s future retirees as a whole, or if it’s just another example of how the mean can sometimes be very different from the median.
First, we’re told retirement accounts are bulging, due primarily to soaring U.S. stock prices:
The surging stock market helped boost average 401(k) balances to yet another record high in 2013. But many young and low-income workers are not doing such a great job of keeping that cash in their accounts.
The average 401(k) balance hit $89,300 at the end of the year, up 15.5% from $77,300 in 2012, according to an annual tally by Fidelity Investments.
But, the bad news comes much later:
A 2013 study by the Employee Benefit Research Institute found that nearly half of workers had less than $10,000 saved.
That’s quite a disparity and it’s a pretty safe bet it’s widened over the last year or so, adding to the growing concern over the nation’s growing wealth inequality problem.
Combine this with the far greater likelihood that small retirement accounts will be cashed out rather than rolled over when a worker changes jobs – a problem that gets a good deal of attention in this story – and the situation is only likely to get worse.
I never cashed out a retirement account, but many, many years ago I do recall not really paying too much attention to it until it breached the six-figure mark. It’s understandable how people could look at a $10K, $20K, or even a $50K balance and think, “I’ll just pay the penalty and take the money”. This was no doubt a matter of necessity rather than choice in many cases in the years following the onset of the Great Recession.