Vanguard Tells the Truth About Retirement Account Balances

Vanguard tells the truth about average retirement balances and I wish uh I wish more people would do this a huge pet peeve of mine so we got the it's very interesting so I did this video yesterday compared well I didn't compare I'm going to do it here today with the uh some annuity group there they say the the immediate balance for retirement accounts is only forty thousand dollars oh my goodness and I assure what Vanguard came up with and uh and yet Vanguard tells you exactly what you need to hear so there's something awry Something Fishy as I said yesterday I'm going to use more of the Vanguard stuff so we're going to start first and foremost at the Vanguard how America saves thing oh I'm probably gonna oh boy Where'd I go what page am I on all right let me bring this up there we go you know I guess pause it so I'm gonna go downstairs a little bit of dogs in the background I come downstairs to charge this thing so this is the 2023 how America saves report I'm a love this report big fan long time uh you know I like vanguards uh sue me I've got my teeth at Vanguard in 1988 1999 and 2000. I'm still a fan um I think vanguard's customer service seems to be a little bit uh having some issues they've kind of grown uh I don't say too fast but anyway so I'm gonna just kind of go to some of the highlights of this and I'm going to show you how Vanguard told the truth interesting 50 three percent of all plans had participation rates of 90 to 100 percent fifty three percent that's that's pretty significant in 2022 91 of automatic enrollment plans had participation rates of 80 or higher so automatically rolling new hires is a wonderful thing to get people to participate in their 401K I thought that's good income is the primary determinant of deferral rates which generally rise with income and tenure which is what I said yesterday too all right so this sipp report said that the average 10 to median ten was nine years and yet people aren't saving anything I don't buy that in 2022 participants with income of less than thirty thousand dollars had deferral rates in the four and a half to five and a half percent range while participants earning 75 to 100 at deferral rates of 8.2 again that's tenure the longer you stay the more money you make the more you stay the more you start deferring into your account this is why the job hopping thing is is bad man if you stay in one job it was a crappy little job the grass isn't always greener baby right it's uh the deferral rate was 9.2 with participants between 100 and 150. age is another important variable in influencing saving the Deferred rate was lowest for younger participants shocking I'm shocked and yet it was averaging 8.7 for people aged 55 to 64. the older you get the more money you make the more you save that so to to do the the median retirement account for these people and I'm like if I'm taking people 25 versus people 58 that's a completely it's just it's like almost two generations difference now the the report that right here is okay that's the you always want to have the natural Sun so I got this little dark they say don't have a dark you look like you're get over here anytime you're doing a video that's a natural sun right there from the window here and here's a shadow from just that light so not the best uh framework for my videos but there you go all right so anyway so the the sipp thing yesterday said that they're only doing uh Gen X so I give them credit for that at least they said that all right let's keep going here participants with account balance is less than ten thousand dollars have the lowest average deferral rate I wonder why because they just started they just started and they're just starting out they're yelling they're not making any money that's why all right let's keep going I thought this was interesting oh right here the deferral Vapor if you're less than 25 4.4 to 5.2 as you get older your deferral rates go up shocking 6.7 7.2 7.6 8.79 the younger you are the less you do for her so to combine this group of people with this group of people it just don't all right come on job tenure oh shocking 10 years or more your deferral rates 8.7 79 years is eight seven is uh it's four to six and seven perceived the longer you're in the job and the older you are not only the more money you most likely make the more you're deferring as well shocking look at that 10-year tenure deferral rate is 8.7 Vanguard has high participation rates for their 401K people so how again are we saying that these and this is also too I'll show you something else or two while we keep going but I so how they saying people only got you know an average a median of 40 000 bucks I don't buy contributing the maximum 45 to 55 uh 18 55 to 64 19 and over 65 18 less than 25 they're only three percent are contributing the maximum shocking shocking but at the end of 2020 the Roth feature was offered by 80 of Vanguard plans and have been adopted by 17 percent of participants if you're in this age group right here the youngins freaking do the Roth you crazy people do the freaking rot if you're not making much money it doesn't make sense to do the pre-tax um again job tenure oh look at that job tenure 20 isn't that crazy huh 20 with people with over 10 years contribute to Max only six percent of the people just started out shocking shocking oh account balance 44 250 000 44 so how again that's the account 44 have over two hundred fifty thousand dollars point five percent have less than ten thousand so what's happening here this goes exactly against what uh we're doing before so let's keep going here considering both employee and employer contributions the average total participant contribution rate was 11.3 and the median was 10.6 when you factored new employer and your employee when eligible non-participants were included so this is just a participants when we add people who aren't participating the median dropped a 9.4 from 10.6 it's still so if you take the people are actually contributing and then add the people aren't you still had a meeting participation rate of 9.4 percent yeah and that's what Vanguard does they take the total population as one group and then they take the only the people that participate in the 401K uh right here um again job tenure again the longer you're on your job the more money you're gonna have in your portfolio uh again most likely and the more you're going to contribute because you're older as well too all right Vanguard estimates that a typical participant should uh have a total contribution of 12 to 15 percent isn't that interesting I don't know if I believe that but you beat SMA so if we take 12 to 15 and if you just take the participants who are contributing they're doing what uh 10.6 I think is what it was right so we're pretty doggone close not having a so the stupid retirement savings crisis is so dumb if they think 12 to 15 in the the median participant is 10.6 we're pretty close 48 again I could we can challenge the 12 to 15 that's I find that stupid but whatever 48 of participants in 2022 had total employee and employer contributions that met the threshold of 12 to 15 nearly half there's a crisis for participants with lower wages Social Security is expected to replace a higher percentage of income and so for a lower retirement savings rate may be appropriate because they have lower wages Social Security is going to replace more than those wages because that's how it works is Progressive all right and so you don't have to contribute so much to replace the same amount of income for higher wage participants Social Security replaces a lower percentage and savings needs might need to be higher shocking shocking huh all right let's keep going uh when participants cheat this is CR this is part critical right here when participants change jobs or retire their plan assets May remain with the plan of the employer they are leaving may be rolled over to another Ira or maybe cashed out as a result current defined contribution plan balances often do not reflect lifetime savings and are only a partial measurement of retirement preparedness for most participants so when you hear the median Vanguard says the media cap house is only 40 . they're seeing it right here when participants change jobs or retire their assets May remain with a plan they may be rolled over to another employer plan or to an IRA or they may be cashed out and as such current balances may not reflect lifetime savings and are only a partial measure of preparedness for most retirees yep so average versus median balances the median balance of Vanguard was twenty seven thousand dollars hmm that's No One's Gonna retire and we just look up right there as a result current DC plan bounces may not reflect lifetime savings I don't the why Divergence between the median averages due to small number of very large accounts that significantly raise it again anytime your averages averages always skews to the outlier like I said a million times twelve percent of participants had a balance of 250 000 where one in four had a balance of more than a hundred thousand however one in three had a balance of less than ten thousand because they are new to their gigs and then interesting it's all about tenure Duty but check this out when we examine continuous participants it was an account balance in 2021 and then 2022 this is 22 is locked but it's down the media account balance declined by eight percent that's it the only decline by eight percent yeah because people continue to put money in 62 percent of these continuous participants saw their balances decline primarily due to negative returns in the equity Bond markets 38 actually sell their balances rise though even though the markets were against skunked primary due to ongoing contributions to our costs averaging uh among continues participants with a balance from 2017 and then 2022 the meeting account balance Rose from 70 to Rose 70 percent 70 from 2017 to 2022 after the negative 2022 year and yeah they're still up 70 from 2017. ninety percent of continuous participants had a higher account balance in 2022 than in 2017. all right so they took it on the chin in 2022 and yeah they're still up 70 so it was a bear Market yeah it's not a bear Market if you look at Five Years anyway good job Vanguard I don't think I had anything else in here I want to talk about um again job tenure so again the longer you've been the more money you got this is the app this is the median balance if you've been there for 10 years your medium balance is 124. again the median tenure according to the thing I did yesterday was nine years and they said they only got ten thousand side camera with us that doesn't make sense seven to nine years their median balance is fifty three thousand dollars zero to one years is three thousand bucks all right so something I tell you man some ain't right in Denmark and I don't know why but uh if I'm on it I'm Sherlock Holmes I'm on it Watson look out all right love your thoughts we'll see ya

Channel: Heritage Wealth Planning

Views: 25,590

Keywords: financial, planning, retirement, investments, insurance, Roth, IRA, TSP, Thrift, Savings, Plan, 403B, 401k, Tax, Planning, Social, Security, Medicare, roth conversions, stock market, financial planning, retirement planning, investing, debt free, Roth IRA, social security, when can I take social security, life insurance, annuities, dave ramsey, 529s, ETFs, investing, passive income, trusts, estate planning, wills, should I do a trust

Id: 89hbDaUtCMM

Length: 11min 35sec (695 seconds)

Published: Wed Jul 19 2023