Letter: 401(k) transition affected net worth
Saturday, November 19, 2011
The Nov. 10 story in The Columbian — “Senior complex growing again: Operators see need for such housing continuing” — mentions a new Pew Research study on seniors’ growing net worth.
It shows a 42 percent wealth increase among seniors today compared to seniors in 1984.
I have no doubt this study may be used by Congress in the future to try to bolster arguments to cut funding for Social Security. However, one thing the story doesn’t mention is the transition in retirement plans from pension plans to 401(k)s.
In 1980, 60 percent of people had pension plans. But by 2006, only 10 percent had pension plans.
So during the last quarter of a century, more people started saving in 401(k) plans to support their retirement.
Since money saved in these plans is counted as net worth, and a pension is not counted as net worth, naturally, on paper, it looks like the senior population is wealthier when, in fact, that population’s total disposable income may be much less.