It would be strange for a news outlet to tell you that a story they’re about to report isn’t designed for a viewer like you. But maybe it’d be just as weird to pretend that it did mean something to you when it obviously does not.
Take this ABC World News report (2/3/14) about the stock market. The news is that the market is down a little this year, after having a rather strong 2013. That in itself isn’t all that revealing. But ABC had to try and make it seem like this matters to you, so they decided to adopt a favorite trick: What this is doing to your 401k retirement fund?
ABC business correspondent Rebecca Jarvis joined the show
The average American family’s 401 (k) hit hard. Now down as much as 5.8 percent this year. Which means that typical nest egg of over $100,000 has lost almost $6,000 in just is last month alone.
Besides stating the obvious–a 6 percent drop is about a 6 percent drop, it turns out–the real question is: Does this sound like a typical family’s nest egg?
No. Most workers don’t have a 401k at all, so hearing about a slight drop in the stock index means nothing to them. So ABC‘s “typical family” isn’t so typical at all. But ABC has a hard time sorting out reality. The report references a retired couple watching the market–and because of the recent downturn, Jarvis explains, “now they join nearly 80 million boomers facing an uncertain future.”
Is any of this typical? It wouldn’t appear so. One estimate is that the median worker 10 years from retirement has saved about $12,000.
To make matters even more confusing, Jarvis closes the report by noting, accurately, that one down month hardly compares with the market’s performance in 2013: “Last year, stocks were up record highs, up 30 percent for the year.” That context is a bit like saying, “Never mind the rest of this report.” So the news is that there’s not much news for those who have retirement accounts. And for the majority of workers who have none of this? Well, who knows–maybe there’ll be a story that relates to your life later on in the newscast.
A “typical nest egg of over $100,000”? The median household net worth in this country is less than $69,000. Excluding home equity, it’s less than $17,000. http://www.census.gov/people/wealth/files/Wealth%20Highlights%202011.pdf
Most US families don’t have “nest eggs”
And more and more of them no longer have their nests.
After 45 years of work in various decent paying jobs, I was no where near that sum when I called it quits.
The “average American family” is beside the point in the first place. The top 1 percent are increasing their share of economic gains, now more than 95%, while income at the low end continues to decline, driving consumption and production downward.
The loss that the ‘ABC World News’ posits ONLY applies to one’s 401K IF they have it all invested in a stock-linked account. I happen to have more than the ‘typical nest egg’ amount referred to, but I didn’t lose a thing in the recent stock market downturn (or any others) because I have it all in the money-market fund. Yes, I don’t make the 30% one year (and lose 40% the next year) like stocks can SOMETIMES do, but — like many 401Ks — my employer matches my savings at a rate of $1 for every $2 I put in (up to 13% of my income), so I’m making 50% on my initial 401K investment right-away with NO risk, which is plenty for someone who isn’t greedy and stupid.
I honestly don’t say this to brag, but as a warning against the assumptive posture that the retirement ‘experts’ who keep pushing stocks take. Stocks are a volatile investment where you CAN lose 5, 10, 20, 30% of your PRINCIPAL in a day or two, which — if it happens a couple of years before your retirement (voluntary or otherwise) — may not be recovered in your ‘golden years’. The stock market brokers/services are much like lawyers – – – they get paid whether you win or lose, so tread carefully.
Most Americans have no nest egg, or if they did, they lived on it while looking for work.
ABC, you should write about the American GOOSE egg, and how to grow one without using the stock market.
@Eddie- That’s great information. Thanks for sharing. Too bad we’d never see that type of story on ABC (aka the ‘Shill of Wall St’).
The government is moving to tie all 401Ks to the bond market.In effect the government will now have their hands in your pie.Advice…..get out of government controlled 401Ks
It’s very difficult to save these days, and I know it’s just not possible to prepare for every eventuality. But you can do many things to prepare as best as you can. If you work for a company that offers a 401(k), learn what you can about and invest in it if you think it will help you, especially if your company offers matching contributions. You can learn more about 401(k)s in general at http://www.mutualfundstore.com/401k. Having a plan is better than no plan at all.