By: Russ Kamp, Managing Director, Ryan ALM, Inc.

I recently published some info from a Vanguard 401(k) survey that indicated that the “average” account balance for a near-retirement participant (decade or less) was an anemic $71,000. Yesterday, there was an article on 401KSpecialistmag.com that highlighted output from Empower’s recent survey. Importantly, they focused on the likely impact on 401(k) contributions once federal student loan debt repayment began again. It shouldn’t be surprising that >40% of those surveyed indicated that they would likely divert contributions into their retirement accounts to fund the student loan debt payments. With one in three households expecting to pay more than $1,000 per month toward the student loan debt.

The Empower survey highlighted a number of other very frightening stats including the fact that 32% of those with student loan debt would likely increase credit card debt to be able to manage this burden. A significant number of responders discussed selling their car, moving back home, finding a roommate, finding a side hustle, cutting back on non-discretionary spending, etc. The one that had me scratching my head had 52% of responders claiming that they would look for a higher paying job, as if those are readily available. If they are, why haven’t they taken advantage of those opportunities already?

Then there is the Bloomberg story that referenced a Schwab national survey released this past Wednesday that asked 1,000 401(k) participants what their target balance was for retirement. Believe it or not, the answer was $1.8 million, an increase of 6% from last year’s survey. So, I ask, who are these survey participants, and do they truly reflect the average American worker’s views? I don’t understand how the average near-term retiree can have only $71,000 and yet, the target for another population of retirement “savers” can honestly say that $1.8 million is their goal. Inflation is impacting most Americans in terms of housing, transportation, food, childcare, medical expenditures, education, etc. 

With student loan repayments about to begin, is anyone surprised that 401(k)s will be the first victim of a finite pool of financial resources? Again, do we honestly believe that asking non-finance pros (the average American worker) to fund, manage, and then disburse a “retirement” benefit with little disposable income, knowledge of the capital markets and investment products, and no crystal ball to help determine longevity, an appropriate policy?