Over the past few decades, American companies have turned away from pensions and toward 401(k) accounts to help their workers save for retirement. That’s been a terrible deal, according to a new analysis released Thursday.
Senior citizens on average drew less than $1,000 from their 401(k)s and similar accounts last year, the left-leaning Economic Policy Institute found when it looked at Census data. By comparison, seniors on average received $6,000 from traditional pensions.
The terrifying reminder that many people are headed for their golden years with hardly enough money to afford cat food for dinner comes at a time when politicians — well, mostly Democrats and Sen. Bernie Sanders (I-Vt.) — are talking about Social Security expansion again.
The amount seniors draw from their 401(k) accounts could edge up a little in the coming years, as the 401(k) generation heads into retirement. These plans started becoming popular in the 1980s.
Still, there’s little evidence that 401(k)s will be as significant a source of income for retirees as pensions were back in the day, said Monique Morrisey, an economist at the Economic Policy Institute who did the analysis.
“There’s very little money in these things [401(k)s],” she told HuffPost. “Yes, they’re gonna increase, but not enough.”
The picture is bleakest for the bottom 60 percent of earners, as you can see.
Social Security is the primary source of retirement income for middle- and lower-income Americans.
“My view is that when you have millions of seniors in this country trying to get by — and I don’t know how they do on $11,000, $12,000, $13,000 a year — you don’t cut Social Security, you expand it,” Sanders said during Tuesday night’s Democratic presidential debate.
Sanders is looking for an across-the-board increase in Social Security benefits. His chief rival, Hillary Clinton, declined to say during the debate if she supports a similar expansion, focusing her comments on improving the situation for women and children.
“Bernie Sanders is onto something,” Morrisey said.
Progressive hero Sen. Elizabeth Warren (D-Mass.) has also been pressing for an expansion, joined by other Democratic senators.
Meanwhile, Senate Majority Leader Mitch McConnell (R-Ky.) is talking about scaling back benefits as part of his party’s ongoing effort to cut government spending.
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