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401(k) Makes Comeback as Retirement Source

Americans are counting on their 401(k) to be a major source of income in retirement at the highest level in nearly a decade.

A new Gallup poll finds that 50% of nonretired Americans expect their 401(k) or other retirement savings account to be a major source of income in their golden years – and that’s the highest (albeit by a single point) that Gallup has recorded since April 2008, just ahead of the financial crisis. Another 30% are counting on it as a minor source.

The percentage expecting their 401(k), IRA, Keogh or other retirement account to be a major income source averaged about 52% in Gallup polling each April from 2001 through 2008. The highest point for this outlook was 58% in 2001, at the tail end of the dot-com boom.

A contributing factor? Prior to the 2007-2009 recession, at least 60% of U.S. adults said they had money invested in stocks or in a mutual fund, 401(k) or IRA. But this began sliding in 2009, falling to 52% by 2013, and is at 54% today.

At the same time, about a third (34%) of nonretirees are counting on Social Security as a major source of retirement income – a finding that is also near the peak in Gallup's 17-year trend. Prior to the recession, between 25% and 29% thought they would rely this heavily on Social Security, but this increased to 31% during the recession and has since ranged from 29% to 36%.

In fact, retirement savings accounts and Social Security are the top two sources of income that today's nonretirees expect to rely on the most. This is true not only in the percentages predicting each will be a major source of income in later years, but also in terms of the combined percentages saying each will be a major or minor source – roughly 80% for both.

Other Sources

Beyond retirement savings accounts and Social Security, regular savings accounts or CDs, as well as employer-sponsored pension plans, figure as major potential income sources for 25% of nonretirees. More than half of nonretirees are counting on each as at least a minor source of income. Also on the “short” list are home equity, part-time work and individual stock or stock mutual fund investments. Roughly one in five nonretirees predicts each of these will be a major income source for them, and majorities of 55% to 71% identify each as at least a minor source.

Fewer than 1 in 10 nonretirees believe annuities or insurance plans, rent or royalty income, or inheritance money will be a major income source for them in retirement. In addition, fewer than half expect these to be either a major or minor source.

Current retirees report depending the most on Social Security, with 55% calling it a major income source for them today and 89% saying it is either a major or minor source. This is followed by an employer-sponsored pension, with 38% calling it a major source, and retirement savings accounts such as a 401(k) or Keogh, at 24%.

The current rank order of expected retirement sources is similar to what Gallup's annual Economy and Personal Finance survey has found each year since annual tracking of this measure began in 2001. The 2017 installment was fielded April 5-9.

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