... The median household headed by a person aged 60 to 62 with a 401(k) account has less than one-quarter of what is needed in that account to maintain its standard of living in retirement, according to data compiled by the Federal Reserve and analyzed by the Center for Retirement Research at Boston College for The Wall Street Journal. Even counting Social Security and any pensions or other savings, most 401(k) participants appear to have insufficient savings. Data from other sources also show big gaps between savings and what people need, and the financial crisis has made things worse. ...
Here's the way things break down in the TAG 401(k) Plan, which covers the bulk of our signator studios:
* 2,225 total participants (active and inactive)
* Average Account Balance -- $58,500
Longtime TAG members working in contract studios have an edge over many. If they have worked approximately twenty years, they will have a monthly annuity coming to them at age 65 in the neighborhood of $1400. On top of that they would have a lump sum out of the Individual Account Plan between $80,000 and $100,000. (Mileage will vary, depending on the number of qualified years in the Motion Picture Industry Pension and Health Plan and the total number of contribution hours.)
So. Let's do some back-of-the-envelope calculations on what a sixty-something TAG animation worker can expect to get after, say, twenty-plus years in the business. (I'll lay out a few other numbers to round out the example.)
* Our TAG vet is getting $1500 per month in MPIPHP monthly pension.
* Our TAG vet is getting $2000 per month in Social Security.
* Our TAG vet has stashed $100K in the 401(k) Plan and has $95K in the IAP (MPIPHP's Individual Account Plan.)
* Our TAG vet has managed to save $320K in various outside investments.
Last set of data points: Our example above has hung it up at age 65; we assume a "safe withdrawal rate" of 4% from the $515,000 nest egg,
So how do all the facts and figures sort out? Our Lucky Ducky will receive a $62,600 per year income to get her (or him) through the sunset years to a final resting place at Forest Lawn.
Now, sixty grand might not seem like one hell of a lot of money, but there are lots of folks across the fruited plain who live on far less. The cold, hard fact is our TAG vet's retirement income is well above the average yearly wage in the good old U.S. of A.
I run around on a daily basis, a bag of 401(k) enrollment books slung over my shoulder, urging TAG members to divert part of their paychecks into the TAG 401(k) Plan. What I find is that a lot of artists in their twenties and thirties don't want to think about saving for retirement because A) they are artists and think visually, not numerically, and B) retirement is way off in some distant and misty future, so they will worry about it later.
Big mistake. To my mind, the most egregious error anybody can make is putting off the deferral of wages into a 401(k) Plan or ROTH IRA. Because the one luxury they won't have when they reach their 40s is time to compound earnings sitting inside investments. Some members tell me: "The 401(k) Plan doesn't have a match, so I'm not interested." They're also making a mistake, because the sheltering of present income is a valuable tool no matter how you slice it, and it's short-sighted not to use the shelter when it's available. (I know lots of artists who jumped into TAG 401(k) Plan when it started in 1995 and now sit atop a quarter million dollars and more, not counting their industry plan accounts. That's sort of useful when you're staring retirement and/or unemployment in the face.)
I keep beating this drum because I have too much first-hand experience with members who haven't planned and haven't saved, and their day-to-day realites aren't pretty. Even if you're unemployed five months of the year, even if you're not making enough to put away 10% of your paycheck, please consider putting away something. Your long-term future will be far rosier if you do.