The Risk of 401(k) - Michigan Elder Law Center

Despite our best intentions and planning to prepare ourselves for the worst, the world has a way of throwing us a curveball that we did not anticipate.

For example, the 401(k) plans that people today have come to depend on in their retirement, were originally intended to provide corporate executives with additional cash to supplement their pensions, in accordance with the 1978 change in tax code, better known as 401(k). Today we are met by the simple truth that intentions do not directly translate into realities. The change in tax code was never meant as a de facto retirement system but here we are.

Before long, employers realized that this change intended to supplement pensions could be used to slash pension expenses and shift a significant portion of the retirement burden onto employees. This awareness was a godsend for companies: instead of setting aside and managing trillions of dollar in pension funds, the funds were wiped off the books. While this lead to immediate relief and perceived benefit, time will reveal consequences far greater.

According to the Employee Benefit Research Institute, the average balance in the nation?s 50 million 401(k) accounts is about $60,000. Our nation?s recent economic downturn has evaporated funds that were negotiated by employers in light of a change in tax law that was designed to benefit employees. Close to a third of the value of 401(k)s ? that?s $1.6 trillion ? was wiped out by the Great Recession.

As absurd and appalling as that is, it gets worse: Approximately half of all of the current workforce have no retirement plan whatsoever. If red flags have yet to raise please consider that most middle class American who will presumably represent the majority of your future customer base, continue to neglect and anticipate long term care costs and living expenses.

Even if 401(k) accounts had not been evaporated, the average American worker?s failure to consider their long term care forecasts an economical storm looming before all of us.

When it comes time for Boomers to seek your services, would you rather have the customer with a $60,000 total retirement fund, or those with pensions? Is your business more secure relying on Medicaid-eligible residents, or customers in a position to help pay?

Attorney Christopher J. Berry is a Metro Detroit estate planning and elder law lawyer who helps families, seniors, veterans and business owners with their important legal needs. Oakland County estate planning lawyer, Christopher Berry is a partner in the Bloomfield Hills law firm of Witzke Berry PLLC. Mr. Berry practices in the areas of estate planning, business, probate, veterans benefits & Medicaid planning. Follow Christopher on Twitter @chrisberryesq

Source: http://michiganelderlawcenter.com/risk-of-ks-future-of-your-long-term-care/

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