401(k)s, Retirement Savings and the Financial Crisis

How much longer would typical workers have to work to recoup their losses?

That's a difficult question to answer, and it depends on many factors, such as how much people save each year, how quickly the money grows and how long a person has been working. We asked Jack L. VanDerhei, research director for the D.C.-based Employee Benefit Research Institute (EBRI), to try to help us calculate an answer.

First, consider that total retirement wealth lost from a year ago is nearly $4 trillion. We're talking about $2.0 trillion in lost income in 401(k)s and Individual Retirement Accounts (IRAs), and $1.9 trillion in traditional defined-benefit plans. In addition, households lost another $3.6 trillion in non-pension assets. This means in one year the value of equities in pension plans and household portfolios fell by about $7.5 trillion.

Typically, younger workers tend to have more stocks in their portfolios while older employees tend to hold safer investments such as bonds. EBRI found that how long a person has been working matters far more than the age of an employee when it comes to calculating recovery time.

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