From Gerri Willis – CNN Personal Finance Editor
Say the word “retirement” and you either get a lot of eye-rolling or looks of pained fear. But whether or not most of us can afford to retire is an open question these days. The median 401k balance is just $15,000, according to Congressional testimony from John Bogle, the mutual fund pioneer who started Vanguard mutual funds. Consider that the typical 401k saver is in their early 40s, the number is especially troubling. With a couple of decades until retirement, that $15,000 will grow to just $100,000 to $150,000 – not enough by most experts’ estimates to sustain them over the two decades or so they are likely to spend in retirement.
Experts who study 401ks say the time for reform of the retirement system is now. Among their suggestions: Curbing excessive fees that many savers don’t even know they are paying.
In the meantime, however, we have to get serious about saving. The good news is one critical vehicle for buildings savings – the stock market – could be poised for improved returns. According to research from the money management firm Leuthold Group, stocks returned no less than 7.2 percent and as much as 15.6 percent annually in the decade following a long-term decline. Check out cnnmoney.com’s retirement section to find calculators that will help you determine how much you will need to save for retirement and where to put it.
Research is a great place to start, but then you’ll want to avoid some of the bad habits that have become common. Try not to tap your savings before you retire. The costs of using your retirement money before retirement is excessive. If you are less than 59.5 years old, and you take a hardship withdrawal, you will pay a 10 percent penalty plus you’ll pay income tax on what you took out. And, remember, if you take out a loan against your 401(k) , the entire balance becomes due and owing if you are laid off!