Sinking 401(k)s Raise Debate on How to Save

Reliance on volatile 401(k)s breeds reluctance to retire

(NEWSER) - Their retirement savings devastated by the financial crisis, older workers are increasingly postponing retirement, the New York Times reports, creating even more competition for scarce jobs. A recent survey found that four in 10 workers over 62 have remained at their jobs longer than they planned thanks to the recession. Our dependence on fluctuating 401(k)s for retirement is turning out to have a perverse effect on the economy, the Times notes. "It’s a sort of reverse automatic stabilizer,” says one economics prof. More»

Cost-cutting efforts increasingly extend to pricey employee benefit

(NEWSER) - Shrinking 401(k) accounts may soon seem like a bit of a luxury as more and more companies eliminate matching contributions to the retirement accounts, reports BusinessWeek. Some 2% of firms in a recent survey said they had already cut out the match, and another 4% said they’ll drop it within the next year as the economy worsens. More»

Economist compares direct-benefit to direct-contribution plans

(NEWSER) - Many employees will enter retirement with a much smaller income than they expect, the Economist reports. By 2014, the amount of money saved in direct-contribution retirement plans—ie 401Ks—will outpace than the amount saved in old-fashioned direct-benefit plans. But workers set contributions to their DC schemes at lower levels than might have been set aside in DC schemes. Add poor investment decisions, and many pensioners could end up with half the retirement income they would’ve drawn under DB. More»

(NEWSER) - Low inflation could force the IRS to decrease the amount workers can contribute to their 401(k) plans to $16,000, USA Today reports. It would mark the first time the government has ever lowered contribution limits. Though a spokesperson says it’s too early for speculation, the IRS may not have any choice. "A strict interpretation of the code could lead them to believe that's their only option," a consultant says. More»

Alpacas, coins, comic books; a stampede to alternative investments

(NEWSER) - With stocks tanking, 401(k)s plummeting, and the market’s usual safe haven—real estate—at the heart of the current crisis, investors are seeking refuge in unusual investments—everything from parking spaces to comic books to alpacas, the Wall Street Journal reports. A growing number of retirees are taking individual control of their IRAs as Wall Street has failed to safeguard their savings. More»