We’ll either wear burlap sacks with dirt on our faces, or light cigars with $100 bills. Views of the efficacy of 401(k)s in retirement planning are really that far apart, with reports pointing one way or another released on a weekly basis.
It’ll take technology to sort it all out. Conservative think-tank American Enterprise Institute says we have “Big Data” to thank for new insight into retirement saving and income, and the news isn’t all that bad.
“Americans are doing a much better job of saving for retirement than is commonly supposed,” writes AEI resident scholar Andrew Biggs. “Despite claims of declining retirement-plan coverage, more Americans have retirement plans today than in the so-called golden age of traditional defined benefit pensions, and new 401(k) rules make today’s workers much more likely to receive benefits once they retire.”
Biggs adds that contributions to retirement plans are at “record levels compared to the past. Contrary to claims that employers have abandoned retirement saving, employer contributions to retirement plans are also at a historical peak.”
He argues that the policy debate over retirement security ignores much of the “best data and research available. While better information does not erase the challenges we face in improving our diverse retirement-saving system, it can help inform the debate.”
Because we fail to see the big (data) picture, policy prescriptions come at a cost to the already-underfunded Social Security program and “threaten to disrupt an evolution in retirement savings that is increasing the number of Americans who are saving for retirement and the amounts that they have saved.”
Biggs concludes by recommending policymakers not dramatically change retirement policy, such as by expanding Social Security or significantly altering tax preferences for private retirement plans, without carefully considering the data used to justify such changes.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
