Design Matters

Art by Jenice Kim

Seventy-seven percent of Americans are confident that their 401(k) or other defined contribution (DC) plan will help them meet their retirement goals, the Investment Company Institute (ICI) found in a recent survey.

This positive response rose to 84% among households actually invested in a DC plan or individual retirement account (IRA); 63% of households without such an investment said they were confident these accounts could help them meet their goals.

ICI also found that people like  defined contribution plans for their tax advantages, investment opportunities and investor control.

“The key features of 401(k), 403(b)and other DC plans really drive their popularity among Americans,” says Sara Holden, senior director of retirement and investor research at ICI. “DC plan participants appreciate the convenience of payroll deduction and the incentive of the tax treatment of these plans to encourage savings. Further, most DC-account-owning households said their employer-sponsored retirement accounts help them think about the long term, not just their current needs.”

The survey found, in fact, that 91% of plan participants say the accounts do keep them thinking long term. Ninety-two percent said the payroll deduction makes it easier to save, and 82% said the tax treatment of their retirement plan gives them a big incentive to save. Nearly half of the people surveyed said that if it were not for their workplace retirement plan, they would not be saving for retirement.

Ninety-four percent said they think it is important to have control of their investments. Eighty-three percent said their plan offers a good lineup of investment options, and 83% also said saving from every paycheck makes them less worried about the performance of their investments.