Not only are Americans generally responsible for meeting their own financial goals for retirement these days, but also the typical American with a 401(k) or other plan is absolutely confused by the whole process. While some find the shift empowering, most Americans find it terrifying. Do they face their fear and rise to the occasion? Heck no. According to the Employee Benefit Research Institute only about 60% of American workers are currently putting money away for retirement, and the average 401(k) balance is only about $86,000.
$86,000. How long could you live on $86,000? Couple years? Not only are retirement accounts drastically under-funded, but also the participants are frighteningly under-educated about the investments that go inside the accounts. Can you explain what a share of common stock is? Preferred stock? Real estate investment trust? How is a mutual fund similar to or different from a variable annuity? If interest rates rise, what happens to the value of your bond mutual fund? What is the Dow, anyway, and why should you care?
This is some serious stuff we’re talking about here, and by the time we’re done, you’re going to understand what all these crazy investment terms actually mean and how they will dictate when and if you get to retire. So, unless you plan on winning the lottery or inheriting a fortune from a rich uncle, I invite you to pour yourself a refreshing drink, maybe make yourself a sandwich, and start facing the question that few Americans are currently brave enough to ask themselves: how am I ever going to retire?
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