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Personal Finance

These depressing charts show the different ways 401(k) plans fall short

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March 4, 2016 at 10:39 a.m. EST
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We already know that the 401(k) has not been a great solution for improving Americans’ retirement security.

But a series of new — and slightly depressing — charts from the Economic Policy Institute point out more of the ways that the retirement accounts are falling short.

Instead of leveling the playing field in retirement, 401(k) plans have the effect of magnifying income inequality, says Monique Morrissey, an economist for EPI who focuses on retirement. And differences in income alone don’t explain the difference, she said, citing that tax law and differences in risk tolerance also could be deepening the gap between what low income and high income workers are able to set aside for retirement.

Take a look at some of EPI’s most compelling charts, which analyze data from the Census and the Federal Reserve:

This graph drives home the shortfalls that people face at every age. Most people have little or no money saved, even those who are close to retirement. Nearly half of all families have nothing saved at all, according to the report. The median account balance for people ages 56 to 61 was $17,000 in 2013, according to the report.

The gap between what top earners can save for retirement and what other workers have saved is growing. In 1995, families in the 90th percentile of earnings had about 50 times the retirement savings as a family earning the median income. In 2013, they had about 55 times as much as a family earning median pay.

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Minority workers are much less likely than whites to have access to a retirement account, but that gap widened after the recession. The number of Hispanic families with retirement accounts fell to 26 percent in 2013 from 38 percent in 2007, according to the report. 

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