Kyla Ernst-Alper is a trapeze artist in New York City. She never had an employer who offered her a 401 (k) retirement plan in more than two decades of experience.
Giles Clement
Kyla Ernst-Alper, a 38-year-old aerial artist from New York City, never had a 401 (k) retirement plan.
She has several jobs at the same time to support herself, and none of them offer retirement options. She pushes what she can into an individual retirement account, but these savings are not always consistent. This is due to his line of work, which was especially affected when the live shows were canceled because of the public health crisis.
“Before the pandemic, people in my community barely paid their bills,” said Ernst-Alper. “You’re lucky if you can save money.”
401 (k) is now considered the primary way Americans save for retirement, especially as traditional pensions have become less common. However, a large number of workers, especially low-income workers, women and people of color, are left behind due to lack of access to plans.
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Overall, about half of private sector workers are not covered by an employer-sponsored retirement plan, either because their company does not have it or because they are not eligible for what is offered, according to the Center for Retirement Research at Boston College. In addition, an increasing number of American workers are generally unable to access a 401 (k) because they are employed or self-employed.
Those who do not have access to an employer-sponsored plan can be left behind without perks, such as equivalent employer contributions or automatic employee enrollment. As a result, 1 in 4 American workers does not even have $ 10,000 saved for retirement.
“For many demographic groups, the typical working-age family has no savings in the retirement account or just a trivial amount,” said Monique Morrissey, a left-wing economist at the Institute of Economic Policy.
They will face a greater risk of poverty in retirement.
Catherine Collinson
CEO and President of the Transamerica Center for Retirement Studies
To be sure, experts say that while 401 (k) plans have their problems, they should not be discontinued. When used, they can be powerful savings tools – the average 401 (k) stake for an investor in his 20s in 2019 was $ 10,500, according to Fidelity. Those in their 30s averaged $ 38,400 saved, while those in their 40s, 50s and 60s averaged $ 93,400, $ 160,000 and $ 182,100, respectively.
“I don’t mean, ‘Get rid of 401 (k) plans,'” said Steve Vernon, a consultant researcher at the Stanford Center of Longevity. “I just want to say that they need to be improved.”
That improvement should take the form of more access, said Nevin Adams, director of content for the American Retirement Association.
In fact, when people have a chance to save on a 401 (k), they take advantage. According to a survey by the Plan Sponsor Council of America, almost 90% of employees who had access to a 401 (k) at work in 2019 made contributions to their plans
Here’s who the plans currently leave behind. (Many people fall into several categories.)
Small business workers
Large companies are much more likely than small ones to offer a 401 (k) plan to their employees, said Catherine Collinson, CEO and president of the Transamerica Center for Retirement Studies.
While 92% of companies with 500 or more employees offered 401 (k) or similar plans in 2019, only 57% of companies with less than 99 employees did so, according to a survey by the Transamerica Center.
“Employers who do not offer plans tend to be new, small, have relatively few employees and / or employ a transitional, temporary, part-time and / or lower-paid workforce,” Angie Chen, assistant research director for Center for Retirement Research at Boston College, he wrote in an email.
Many of these workers do not have time to advocate for change.
“These employees generally have urgent financial needs that normally prevent any demand for employer-provided retirement security,” said Chen.
Low and middle income workers
Higher-income individuals are much more likely to be offered 401 (k) at work than those with lower incomes, which only exacerbates inequality in savings for retirement.
More than 70% of workers with a family income above $ 100,000 have access to a 401 (k), compared with 50% of those with a family income below $ 50,000, Transamerica found.
“Income disparities and access to retirement benefits suggest that low-income workers will inevitably depend on Social Security for a larger proportion of their retirement income,” said Collinson. (The average Social Security check is less than $ 1,400.)
“They will face a greater risk of poverty in retirement.”
Part-time and show workers
Danny Samet, 28, has been saving to retire through a few different investment accounts, he said. As a freelancer in the music industry, he never had an employer-sponsored retirement account.
Chase Kensrue
401 (k) plans are mainly associated with traditional full-time employment.
However, the survey found that the share of American workers engaged in temporary or unstable work is increasing rapidly.
Many of those workers who make a living from apps or work only for companies as freelancers will not have access to a company retirement plan. In fact, only 41% of part-time workers received a 401 (k) plan from their employer, revealed the Transamerica survey.
While it is possible to establish and contribute to a so-called 401 (k) solo, without a little push from an employer to enter or automatically enroll in resources, many show workers give up these options.
Danny Samet of Cincinnati has always worked as a freelancer as a tour manager and band merchandiser, jumping from one show to the next. He never saved on a company-sponsored retirement plan, but he saved what he could in a few different IRAs.
In his industry, he said, most people have no savings for the past few years.
“There are a lot of people who are not preparing for retirement,” said Samet, 28.
People of color and women
Jenny Lezan
Source: Jenny Lezan
People of color and women are more likely to work in industries or jobs that don’t give them access to an employer-sponsored plan, according to John Scott, director of retirement savings projects at Pew Charitable Trusts.
They also generally earn less than white men, which generally means that they are able to save less over time.
Half of white families of working age have access to a 401 (k) or similar plan in their current job, compared with 37% of black families and 26% of Hispanic families, according to the EPI.
Jenny Lezan, from Naperville, Illinois, does not qualify for a retirement plan at the school where she teaches because she is an adjunct professor.
“I am considered a contract worker,” said Lezan, 35. “I don’t have any retirement funds now, which is kind of scary, to be honest.”
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