One-third fewer 401(k) millionaires?
Feb. 26th, 2023 09:27 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
canyonwalkerA few days ago I saw an article that caught my eye, "America's 401(k) millionaires have plunged by a third" (CBS MoneyWatch 24 Feb 2023). It's interesting because (a) I watch news about investing and retirement; and (b) it's another article in a line of junk statistics about 401(k) accounts I've seen covered in the news.
The reason it's junk is that they're taking data from just one brokerage company, Fidelity. The real statistic is that of accounts held at Fidelity, there are one-third fewer with balances of over $1 million. Why does that make a difference? Well, for the literal headline it makes a small difference, but it renders false most of the other statements in the body of the article.
Why are the conclusions false? ...Or unsupported, if you'd prefer a softer word? It's because most people don't have all their retirement money in a single account. For example, I have four retirement accounts spread across three different brokerages. And I'm not alone. Other articles in the same few past days have reported that most Americans have fragmented retirement accounts. (Fragmented is not necessarily bad, BTW. Mine are fragmented mostly because they're different types of accounts. I manage them all, and they're all working efficiently.)
BTW, it's not just one news media company that doesn't really "get" retirement math, it's basically all of the general media. Numerous other news outlets ran the virtually the same story. Why don't they get it? Frankly it's because most retirement articles in the general media are written by 23-year-olds with little financial education or life experience. Moreover they may be overseas contractors who have no cultural familiarity with American retirement systems. Or possibly they're AIs that only know how to draw straight-line (if erroneous) conclusions from simplistic data presented to them.
The reason it's junk is that they're taking data from just one brokerage company, Fidelity. The real statistic is that of accounts held at Fidelity, there are one-third fewer with balances of over $1 million. Why does that make a difference? Well, for the literal headline it makes a small difference, but it renders false most of the other statements in the body of the article.
Why are the conclusions false? ...Or unsupported, if you'd prefer a softer word? It's because most people don't have all their retirement money in a single account. For example, I have four retirement accounts spread across three different brokerages. And I'm not alone. Other articles in the same few past days have reported that most Americans have fragmented retirement accounts. (Fragmented is not necessarily bad, BTW. Mine are fragmented mostly because they're different types of accounts. I manage them all, and they're all working efficiently.)
BTW, it's not just one news media company that doesn't really "get" retirement math, it's basically all of the general media. Numerous other news outlets ran the virtually the same story. Why don't they get it? Frankly it's because most retirement articles in the general media are written by 23-year-olds with little financial education or life experience. Moreover they may be overseas contractors who have no cultural familiarity with American retirement systems. Or possibly they're AIs that only know how to draw straight-line (if erroneous) conclusions from simplistic data presented to them.
