In a new study by the Investment Company Institute, 56% of DC plan participants agree that they probably wouldn’t save for retirement if they didn’t have a plan at work.
ICI’s “American Views on Defined Contribution Plan Saving, 2019” study found that agreement was the highest (70%) among individuals with household incomes between $30,000 and $49,999. The level fell only slightly to 63% for those with incomes less than $30,000 and 60% for those with incomes between $50,000 and $99,999.
A large majority of respondents are also confident the plans can help them meet their retirement goals. Not surprisingly, confidence was highest among individuals who hold DC accounts or IRAs, at 81%, but that remains true even among individuals who did not hold either DC accounts or IRAs, with 66% expressing confidence.
What’s more, 9 out of 10 DC-owning individuals agreed that these plans helped them think about the long term and made it easier to save. In addition, saving paycheck-by-paycheck made more than 8 out of 10 DC plan participants surveyed less worried about the short-term performance of their investments.
“The key features offered by DC plans provide workers with a disciplined approach that encourages them to continually save and invest for retirement on a regular basis,” notes Sarah Holden, ICI senior director of retirement and investor research. “The flexibility and control that savers have over their DC plan accounts make it easier for savers to build retirement nest eggs, while not only thinking about their current needs, but their long-term goals.”
Opposition to Changing Tax Treatment
The survey also found that an overwhelming majority of Americans disagree with potential changes affecting DC plans. According to the findings, 87% want to preserve tax incentives for DC plans, and 90% disagreed with reducing the amount that individuals can contribute to their DC accounts.
The survey also found widespread support for the tax treatment of DC accounts and IRAs even among those who are not currently taking advantage of them. Nearly 80% of individuals without DC accounts or IRAs opposed the idea of taking away the tax treatment of DC accounts, further reinforcing the notion that Americans strongly support retaining the structure of DC plans, ICI notes.
Choice and Control
Nearly all DC plan participants agreed that it was important to have choice in, and control of, the investments in their accounts. To that end, 93% of respondents agreed that individuals should be able to make their own decisions about how to manage their own retirement assets and income.
More than 8 out of 10 indicated that their DC plan offered a good lineup of investment options, and a similar amount (83%) disagreed with investing all retirement accounts in an investment option selected by a government appointed board of experts. Along those same lines, about 8 out of 10 survey respondents disagreed with the idea that retirees should be required to trade a portion of their retirement accounts for a lifetime income option.
The findings are based on the results from a survey of 2,028 American individuals aged 18 or older who were asked about their views on DC retirement account saving, their reactions to proposed policy changes, and their confidence in 401(k) and other DC plan accounts. The survey was conducted in November and December 2019 using the AmeriSpeak research panel.
