December 05, 2014
Floyd Norris (who unfortunately has accepted a buyout and will be leaving the paper) had an interesting piece on the disappearance of traditional defined benefit pensions. He notes that millions of workers in multi-employer plans are at risk of sharp reductions in benefits. Detroit city workers and retirees have already seen sharp declines in benefits.
After pointing out that few workers now have secure pensions, he then refers to a new book by Alicia Munnell, Charles D. Ellis and Andrew D. Eschtruth, which he cites as saying that the typical household near retirement has only $110,000 in a 401(k). Actually this figure refers to the roughly half of near retirees that have a 401(k). The median near retirement household has considerably less money in a retirement account.
According to our recent analysis of the Fed’s 2013 Survey of Consumer Finance, the average net worth outside of housing wealth for families in the middle quintile of households between the age of 55-64 was just $89,300. This figure includes all assets in 401(k)s, plus any money held in checking and saving accounts and any non-housing tangible assets, like a car or boat. it would subtract non-mortgage debt like credit cards, car loans, and student loans.
The average home equity stake for households in the middle quintile in this age cohort was $76,400, this accounted for 54.6 percent of the home’s value. In 1989, households in the middle quintile in this age group had more than 81 percent of their home paid off on average.
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