In a remarkable confession published Saturday in the New York Times, columnist Joe Nocera wrote in painful detail about how, as he's about to celebrate his 60th birthday, he is financially unprepared to retire now or any time soon. The reason: Because he's got so little money saved in his 401(k) plan.
How could this happen to a widely-respected financial journalist who's spent much of his career writing about the stock market and investing?
Nocera cites the usual factors that have landed many other aging baby boomers in the same grim spot: He overloaded on tech stock in the mid 1990s, then lost half his portfolio when the tech bubble burst in 2000. Add to the mix a divorce that cut his 401(k) in half yet again, savings he withdrew to remodel his home, and suddenly he's become a role model of what not to do.
Though Nocera owns up to his own financial failings, he says his situation underscores a much larger problem:
Linking workers' retirement plans to a risky stock market regardless of their financial know-how is a recipe for disaster. Even those who get it right by saving earnestly, diversifying carefully and not tapping into retirement funds prematurely are still vulnerable if the market tanks and there isn't enough time to make up for losses.
In other words, Nocera says the U.S. retirement system is broken. Most Americans don't have an employer-sponsored pension to provide a steady stream of monthly income in retirement. Defined contribution plans, Social Security and savings -- the three-legged stool that props us up in our retirement years -- is looking mighty wobbly as one poll after the next documents how little baby boomers have saved.
And that includes a financially savvy boomer like Joe Nocera, whose brutally honest column stunned readers far and wide.
One wrote: "Even those of us who have scrupulously "stayed the course," scrimping and investing through the decades, can't help but feel a similar sense of futility and despair at times. Nocera is right: for most people it is madness to link investment with retirement. Even for smart people it often is. One good crisis and you're floating away on your own pitiful iceberg."