Climate Change and a Net Zero Economy

Automatic TRANSCRIPT

All that and more on this week's episode of motley fool answers bro. What's up well elson. I got a couple of things for you. And now i agree three. You're only getting to only two but a lot of numbers trying to spread it out. I know nothing nothing like a like number number one retirement accounts on the rise so we humans are social creatures and part of being a social creature is that we compare ourselves to everyone else and kind of hope that we're better than all the other creatures and we see this at the before because anytime we published an article about things like the average 401k balance man. It is sure to get a lot of clicks popular. Yes well we're not above doing such things here on answers. So let's dig into the latest numbers from fidelity which recently published account balance information as of the end of last year. And those balances are at all time highs so according to all the accounts civility average. Ira balance as of the end of two thousand. Twenty eight was a one hundred. Twenty eight thousand average 401k balance. A hundred and twenty two thousand and average for three be balance one hundred and six thousand. Of course how much someone has in a 401k. Or tablet account depends on other factors. Like how long. They've been at the same company and their age. So here's some numbers. They provided just based bastad eight for people in their thirties. The average balance is fifty one thousand people in their forties and twenty one thousand people in their fifty s. Two hundred and four thousand people in their sixties. Two hundred twenty nine thousand thousand. How are people doing in terms of their savings rate while that's also at an all time. High average savings rate for 401k. From the employee was nine point. One percent ad in the employer match and a total thirteen point five percent was being contributed to 401k counts at fidelity and despite all the difficulties last year during the pandemic panic and the recession and all that stuff thirty three percent of individuals with a 401k at fidelity increased their savings rate at some point in two thousand. Twenty workers are also taking more advantage of. Ira's the number of ira's accounts that received a contribution increased by a third last year and the amount that was contributed was up by five percent and ross are increasingly more popular. Last year at fidelity they took in fifty nine percent of all. Ira contributions and speaking of ira's remind you that you do have until april fifteenth to contribute to an ira for twenty twenty so still have a few more weeks to do that but why not take care of it now. Of course not. Everyone did so well last year. Thanks to the cares act. People who suffered a corona virus related hardship world to take money out of their retirement accounts penalty free and some people did take advantage of that but perhaps not as many as some people feared what happened so of the folks who have an employer plan at fidelity six point three percent took a cares act distribution and the average amount was ninety four hundred so not so bad and as a reminder for those who did take money out you have up to three years to put that money back in if your financial situation turns around so it's the first item. Let's move on to the second item which is critical. San loves retirees to so we just talked about ira's and 401k's which workers used a safe retirement because the tax advantages and disadvantages are in place because the government is basically trying to incentivize people to save for their golden years but the tax breaks. Don't stop once you quit working. A recent study from the center for retirement research. Boston college estimated how much in taxes retirees will go on their income. And it's pretty dang low now one reason its lowest because the average retirees income is pretty low at least compared to the median income of all households in america which days is around seventy thousand dollars per household so according to the study for people who are tired between the years two thousand ten and twenty eighteen the households in the middle twenty percent so the middle quintile received an annual household social security benefit of thirty four thousand four hundred and for those who received a pension. The annual benefit was eight thousand dollars. The total value of their wealth of the average retiree was a little under two hundred thousand dollars. Came one hundred. Eighty six thousand dollars. So let's just apply yield four percent rule to that amount that results in another seventy seventy five hundred annual income. So all told the average retiree is getting by on between forty thousand and fifty thousand dollars a year but that income is taxed as much as if the same amount had been earned by working stiff. That's because not also security is taxed citizens sixty five and older a higher standard deduction some of that income that retirees receive is from qualified dividends and long term capital gains which tax lower rates and many states offer tax breaks to retirees so all told the study found that retired households in the aggregate will pay only about six percent of their income in federal and state income taxes and most of that liability is being levied on the top quintile. The top twenty percent the lower eighty percent in terms of income. The taxes are almost nothing. They range from zero percent to one point nine percent. It's really the top twenty percent and really the top five percents of retirees who are paying most of the taxes so the

Coming up next