Recession Decreased Expected Reliance on 401(k)s

Fewer Americans plan to rely on a 401(k) account as their main source of retirement income than planned to prior to the recession, according to a recent Gallup poll.

The survey found 48% of nonretired (i.e., working) respondents in 2014 say 401(k) retirement plans will be their primary source of income during retirement, compared with 54% who said so in April 2008. In addition, since the recession began, more nonretirees expect Social Security to be a major source of retirement income than did so before 2008. From 2002 to 2007, between 25% and 29% of nonretirees expected it to be a major source of income, compared with 30% to 34% from 2008 to 2014.

An additional 51% of nonretired Americans expect to rely on Social Security as a minor source of income.

The decrease in value of their 401(k) investments during the recession seems to have created skepticism with nonretired Americans that such investments could be relied on as a source of retirement income, Gallup says. It may also reflect the higher volatility in the stock and housing markets, as fewer Americans feel comfortable trusting their retirement income to these sources and instead consider Social Security the safer option.

However, for retired Americans, in 2014, 22% rely on a 401(k) or similar savings account as a source of retirement income, compared with 23% in 2013 and 20% in 2008. Gallup noted the recession did not decrease retirees’ reliance on these accounts as much as it decreased nonretirees expectations for reliance on these accounts.

Between 2002 and 2014, Gallup found between 50% and 61% of retirees have considered Social Security a major source of income.

The results for the poll are based on telephone interviews conducted April 3 to 6, 2014, with a random sample of 1,026 adults (334 retirees and 692 nonretirees), age 18 and older, living in all 50 U.S. states and the District of Columbia.