RACHEL MARTIN, HOST:
A few weeks ago, a tweet about retirement advice caused a big old uproar on Twitter. Here's what it said. By the age of 35, you should have twice your salary saved, according to retirement experts. This tweet was from the news site MarketWatch, promoting an article about retirement goals, and it clearly touched a nerve. Cardiff Garcia and Danielle Kurtzleben from NPR's Planet Money team bring us this story.
CARDIFF GARCIA, BYLINE: If you are around 35 and that tweet freaks you out, that would be pretty normal.
DANIELLE KURTZLEBEN, BYLINE: Right. Because if you take all the workers between the ages of 35 and 44 who have 401(k) retirement accounts, and if you look at the typical person from that group, that person has just 59 percent of his or her salary saved. In other words, not even close to that twice-your-salary amount that MarketWatch was tweeting about. So that's what they do have. Let's get to what they should have. Here's what one retirement expert thinks of that twice-your-salary-by-35 rule.
ALICIA MUNNELL: That seems like a lot.
KURTZLEBEN: That's Alicia Munnell, director of the Center for Retirement Research at Boston College.
GARCIA: She says these benchmarks are slippery because they depend not only on your income but also on things like when you start working, how long you plan to work, how well you invest your money and, also, how long you live. And this is where we need to take a pause and acknowledge something super important. Even talking about savings, we're missing a big part of the picture.
KURTZLEBEN: Around half of workers don't have a retirement plan at all. So Americans seem to be in bad shape retirement-wise.
GARCIA: But this also raises questions about how fundamentally flawed our retirement system is. Is there something about 401(k)s themselves that makes saving kind of tough? And who better to ask than the ultimate 401(k) source? Ladies and gentlemen, the creator of the 401(k).
KURTZLEBEN: You're known as the, you know, the father of the 401(k), or the inventor of it. How do you feel about those titles?
TED BENNA: I'm fine with them.
KURTZLEBEN: OK. Meet Ted Benna. Back in the early 1980s, he worked at a benefits consulting company, and the bank had asked him to design a replacement for cash bonuses for its employees. At the time, there was a relatively new provision in the tax code, that is Section 401(k), and it would allow people to put off receiving part of their salary, invest that money in a retirement account and allow employers to match.
I've read that these were originally called Salary Reduction Plans. Am I right on that?
BENNA: Well, yeah. Exactly. 'Cause that's what they were. That's what they are.
KURTZLEBEN: Even though Benna is the father of the 401(k) and he's proud that they've helped save people trillions of dollars, he knows the 401(k) is not perfect, not by a long shot.
BENNA: It's become much too complicated for the average employee. And then, you know, the fees are way in excess of what they need to be.
GARCIA: And, over the years, Ted has given a lot of advice for how people should best manage their retirement money.
BENNA: Remember, these are ideals. I've always said, hey, look, start at 1 percent. Get in the game.
KURTZLEBEN: And if you aren't in the game, the alternative to saving more now is working longer down the road.
(SOUNDBITE OF THE NOTORIOUS B.I.G. SONG, "MO MONEY MO PROBLEMS")
MARTIN: Get in the game. That's Danielle Kurtzleben and Cardiff Garcia from NPR's short, daily economics podcast, The Indicator from Planet Money. Transcript provided by NPR, Copyright NPR.
