Workplace DC Offering Key to Retirement Readiness

The ability to participate in a defined contribution (DC) retirement plan at work is imperative for having enough money to afford basic expenses and cover uninsured medical care in retirement, EBRI research finds.

Research from the Employee Benefit Research Institute (EBRI) finds the risk level for an unprepared retirement declines the longer a worker is able to participate in a work-based DC plan. For instance, looking at someone in Gen X (born between 1965–1974) in the next-to-lowest income quartile, eligibility in a DC plan has a strong impact on retirement income adequacy: 58% of households eligible for DC plan participation less than one-quarter of future work years would be at risk at least 50% of the time, compared with only 21% for those eligible at least three-quarters of future work years, EBRI reported.  

EBRI’s analysis notes that retirement income adequacy in the future depends on a number of factors, including the assumed retirement age, participation rates, employee contribution rates, employer matching formulae, employer non-elective contributions, asset allocation, job turnover, cashout rates, and rates of return.  

However, Jack VanDerhei, EBRI research director and author of the report, said: “A crucial factor in workers’ ability to achieve future retirement income adequacy is their eligibility to participate in a defined contribution plan.”  

The full report appears in the April 2011 EBRI Notes “Retirement Income Adequacy: Alternative Thresholds and the Importance of Future Eligibility in Defined Contribution Retirement Plans,” online at