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Americans: In Defined Contribution We Trust
By Sarah Holden
March 8, 2018
Millions of Americans personally direct their retirement investments in defined contribution (DC) plans, which account for nearly $8 trillion in savings. Because it is vitally important that regulators, policymakers, and employers understand the beliefs and behaviors of these investors, ICI asked Americans what they thought of DC retirement plan accounts, which include 401(k) and 403(b) accounts.
The results, which we summarized in “American Views on Defined Contribution Plan Saving, 2017,” were clear: whether they had DC accounts or not, Americans appreciate DC plan accounts and are confident that these plans can help people meet their retirement goals.
People Have Favorable Impressions of DC Plans
The survey, conducted in fall 2017, found that almost three-quarters of US households (74 percent) had favorable impressions of DC plan accounts (see Figure 1, below). Among households expressing an opinion, 93 percent had favorable impressions of DC plan accounts, with nearly half expressing a “very favorable” opinion.
Households owning DC accounts or individual retirement accounts (IRAs) were more likely to express a favorable opinion than non-owning households. Nevertheless, favorability was high even among non-owning households that expressed an opinion about DC account investing.
FIGURE 1
Households Have Favorable Opinions of DC Plans
Percentage of US households, fall 2017
Source: ICI tabulation of GfK KnowledgePanel® OmniWeb survey data (fall 2017); see “American Views on Defined Contribution Plan Saving, 2017,” ICI Research Report (February 2018)
Americans also expressed confidence that DC retirement plan accounts can help individuals achieve their retirement goals: 77 percent of US households indicated that they were either “somewhat confident” or “very confident” that 401(k) and other employer-sponsored retirement plan accounts can help people meet their retirement goals (see Figure 2, below).
Confidence was higher among those who owned DC accounts or IRAs, but even 63 percent of non-owners expressed confidence in the DC retirement plan system.
Figure 2
Confidence That DC Retirement Plan Accounts Can Help Individuals Meet Retirement Goals
Percentage of US households by ownership status, fall 2017
Source: ICI tabulation of GfK KnowledgePanel® OmniWeb survey data (fall 2017); see “American Views on Defined Contribution Plan Saving, 2017,” ICI Research Report (February 2018)
American households value the saving opportunity provided by DC plans and appreciate the features designed to help investors save for retirement:
- nine out of 10 households with DC accounts agreed that these plans helped them think about the long term and made it easier to save (see Figure 3, below);
- nearly half of households with DC accounts indicated they probably would not be saving for retirement if not for their DC plans; and
- 82 percent of DC-owning households said that the tax treatment of their DC retirement plans was a big incentive to contribute.
DC account–owning households also appreciated the investing features of their DC plans:
- 94 percent of DC-owning households agreed that it was important to have choice in, and control of, the investments in their retirement plan accounts;
- 83 percent agreed that their DC plan offers a good lineup of investment options; and
- 83 percent of DC-owning households said that saving paycheck-by-paycheck made them less worried about the short-term performance of their investments.
Figure 3
Defined Contribution Account–Owning Households’ Views on the Defined Contribution Plan Savings Vehicle
Percentage of DC-owning households agreeing with each statement, fall 2017
Note: The figure reports the percentage of DC-owning households who “strongly agreed” or “somewhat agreed” with the statement. The remaining households “somewhat disagreed” or “strongly disagreed.”
Source: ICI tabulation of GfK KnowledgePanel® OmniWeb survey data (fall 2017); see “American Views on Defined Contribution Plan Saving, 2017,” ICI Research Report (February 2018)
DC plans have become a common feature in the US retirement landscape, with millions of US households now holding a portion of their assets in them. Households value current plan design features, and have confidence that these plans can help people meet their retirement goals. And not surprisingly, households revealed a strong preference for preserving the features and flexibility of DC accounts.
Full details on the survey and additional results can be found in “American Views on Defined Contribution Plan Saving, 2017,” while more information about 401(k) plans—including FAQs, videos, and publications—can be found in ICI’s 401(k) Resource Center.
Sarah Holden is senior director of retirement and investor research at the Investment Company Institute.
Permalink: https://www.ici.org/viewpoints/view_18_american_views
TOPICS: 401(k)Investor ResearchRetirement PolicyRetirement Research
States Are Abusing Abandoned-Property Funds to Plug Budget Shortfalls
By Tamara K. Salmon
January 11, 2018
Imagine finding out that your investment account has been turned over to your state because it was considered “abandoned.” Imagine, too, that after the account was turned over to the state, the account received a capital gains distribution. As a result, you are liable for paying the taxes on that distribution—and can be assessed monetary penalties for not paying the taxes in a timely fashion.
TOPICS: Fund RegulationGovernment AffairsMutual FundRetirement PolicySavingsShareholderTaxes
Let’s Give the US Retirement System the Credit It Deserves
By Sarah Holden
December 27, 2017
The Washington Post’s latest article on the future of retirement security (“‘I Hope I Can Quit Working in a Few Years’: A Preview of the US Without Pensions,” December 23) is not a preview but a retrospective look at some of the challenges that workers face in defined benefit (DB) pension plans even at “blue-chip” firms. As documented in the article, with traditional DB plans, workers often failed to get their full promised benefits, thanks to vesting rules, back-loaded benefit accrual, business failure, and labor mobility.
TOPICS: 401(k)Financial StabilityRetirement PolicyRetirement Research