A scary perspective on Social Security

For all the hype about Social Security's impending demise, it's nothing compared with your clients' 401(k)s. In a follow-up to last week's commentary on the 2009 Social Security Trustees report, Alicia Munnell of the Center for Retirement Research points to the following:

"The new information that we have about Social Security is how well it has withstood the onslaught of the financial/economic crisis. Social Security checks have gone out on time. Though the amounts are not large, the benefits are increased each year to reflect changes in the cost of living, and they continue for as long as the recipient lives.

"In contrast, the financial crisis has demonstrated the vulnerability of 401(k) plans to economic and financial conditions. 401(k) balances, which are modest at best, declined in value by about one-third. And, as the financial crisis spread to the real economy, employers suspended their matches, and employees without jobs were forced to discontinue contributions. In other words, in the wake of the shift away from traditional defined benefit pension plans, the only real supplement to Social Security for most private sector workers is fragile."