Young workers just entering the workforce will only save enough money in their 401(k)s to replace 22% of their pre-retirement income, according to a Government Accountability Office report released today by House Education and Labor Committee Chairman George Miller, D-Calif.
Thirty-seven percent of workers born in 1990 will reach retirement age in the 2050s with no savings at all in a 401(k)-type account, according to the report.
The report highlights the need for prompt action, said Mr. Miller, who requested the GAO report.
“Unless we act now, too many workers just starting their careers today will unfortunately face a less secure retirement than did many of their parents,” Mr. Miller said.
Mr. Miller has sponsored a bill requiring better disclosure of 401(k) fees as well as a mandate that a low-cost index fund be included in all 401(k)s.
The current median 401(k) account balance is $22,800, according to the GAO report.
Among workers aged 55 to 64 with 401(k) type retirement savings plans, the median account balance in 2004 was $50,000, the report found.
That would provide annual income of only $4,400 a year, replacing about 9% of income, on average.
The GAO report suggested that workers should be able to participate in 401(k)s or other retirement savings plans as soon as they start a job, and it suggested that retirement savings be automatically rolled over into new retirement plans when workers leave jobs.
The report can be found at: http://edlabor.house.gov/publications/401k-GAO-Report-Low-Savings.pdf .