401(k) Balances Projected To Weather Market Fluctuations
When combined with Social Security payments, the 401(k) plan accumulations of employees contributing from their late 20s until retirement should provide sufficient income for the standard of living usually recommended by financial advisors, according to an Issue Brief published this month by the Employee Benefit Research Institute, Washington.
Jack VanDerhei, the Temple University business school faculty member who wrote the brief, looked at whether the plans will be an effective vehicle for retirement savings for employees retiring between 2035 and 2039.
VanDerhei says projected retirement income from 401(k) accumulations is likely to be significant despite brief periods of poor stock market performance.
“We took the worst three contiguous years, and still if youve been in a plan your entire career, youll have a sizable replacement rate” for income received while working, VanDerhei says.
Even if stocks perform as poorly as they did during the worst 50-year period in the history of the stock market (1929-1978), 401(k) plan accumulations should still be significant, according to VanDerhei.