Many industry experts will tell you that a 401k plan is an inadequate vehicle for a retirement plan. That is partially true, taken alone; few will be able to maintain their retirement needs solely on their 401k savings. But as much as we hear about individual investors failing when it comes to self-directed investing, millions of American savers are doing quite well managing their long-term 401k portfolios.
According to the Investment Company Institute (ICI) report: AMERICAN VIEWS ON DEFINED CONTRIBUTION PLAN SAVING, 2016, seventy percent of US households had a favorable view of 401k and similar plan accounts. And while the ICI report focuses on attitudes towards the tax benefit side of 401k savings plans, it is revealing about a larger phenomenon.
The presence of professionally managed funds within the 401k investment choice menu is the key to retirement plan savings success, as opposed to employees picking and choosing individual stocks and investments. Mostly, the 401k plan overwhelming results in savers looking at retirement investing as a long-term process, no small feat.
Survey responses indicated that households value the discipline and investment opportunity that 401(k) plans represent and that households were largely opposed to changing the tax preferences or investment control in those accounts. A majority of households also affirmed a preference for control over the disposition of their retirement accounts and opposed proposals to require retirement accounts to be converted into a fair contract promising them income for life from either the government or an insurance company
- Seventy percent of US households had favorable impressions of 401(k) and similar retirement plan accounts in fall 2016, similar to 72 percent in fall 2015 and 71 percent in fall 2014.
- Among households expressing an opinion, 89 percent had favorable impressions of 401(k) plans, with 38 percent agreeing that they had a “very favorable” impression. » Survey responses in fall 2016 indicated that households appreciate the key features of DC plans, an outcome that is similar to the previous survey results.
- Nine out of 10 households with DC accounts agreed that these plans helped them think about the long term and made it easier to save. Forty-four percent of DC-owning households indicated they probably would not be saving for retirement if not for their DC plans. In addition, saving paycheck-by-paycheck made more than two-thirds of DC-owning households surveyed less worried about the stock market.
- Eight in 10 DC-owning households said the tax treatment of their retirement plans was a big incentive to contribute.
- Nearly all households with DC accounts agreed that it was important to have choice in, and control of, the investments in their DC plans. Eighty-one percent indicated that their DC plan offered a good lineup of investment options.
