401(k)s are among the most widely used retirement savings vehicles in America. One reason for this is that millions of working adults have access to these defined contribution (DC) plans through their employers. However, 401(k)s are also very popular because many Americans can recognize the value inherent to these plans. At least that is what a new study from the Investment Company Institute (ICI) suggests after finding that 70 percent of surveyed U.S. households had favorable impressions of 401(k)s last year.
In fact, 38 percent of the households that expressed an opinion on 401(k) plans said that they had a “very favorable” impression. Such positive sentiment is not too surprising considering that 90 percent of surveyed households with 401(k) accounts reported that they believe their DC plans have helped them plan for their financial future and made it easier to set money aside for retirement. Moreover, almost half (44 percent) of DC plan participants said that they believe they would likely not be saving for retirement currently if they did not have access to a 401(k).
Three-quarters of all survey respondents reported that they believe their DC plans can help them meet their retirement goals, and 80 percent of 401(k)-owning households said that the unique tax treatment of these plans is a big incentive to contribute. As expected, the vast majority (89 percent) of respondents disagreed with a suggestion that the government should reduce or take away the tax advantages of 401(k)s, and 90 percent also reported that they do not want to see Uncle Sam lower the amount of money that individuals can contribute to a DC account each year.
Elsewhere in the report, two-thirds of respondents said that they are less worried about stock market volatility thanks to their paycheck-by-paycheck 401(k) contributions, and 81 percent of surveyed participants indicated that they believe their plan offers a “good lineup” of investment options. The latter is encouraging given that nearly all (96 percent) surveyed households with 401(k) accounts agreed that “having choice in, and control of” the investments in their DC plans is important. Similarly, 84 percent of respondents reported that they would not want to allocate all of their retirement assets to “an investment option selected by a government-appointed board of experts.”
Sources: Investment Company InstitutePost author: Charles Couch