Though the Investment Company Institute’s eight annual survey entitled “American Views on Defined Contribution Plan Saving, 2015” shows a vast majority of households favoring retirement plans like 401(k)s and IRAs, only a relatively small percentage are very confident in their ability to meet their retirement goals.
Defined contribution plans like 401(k)s and 403(b)s and IRAs have come under heavy attack by the press, critics and some regulators citing high fees, conflicts of interest, lack of coverage and poor results But the DC system is attracting significant assets and covers over 60% of full time workers over 21. Fee disclosure in 2012 invigorated industry efforts for more fee transparency leading to better deals for employers. The DOL’s proposed conflict of interest rule will accelerate the move to more experienced and specialized DC plan advisors which gained momentum over a decade ago. In addition, state efforts aided by the federal government will force more companies to offer payroll deducted retirement plans.
So what do American households think of the DC and IRA industry?
- 88% oppose reduction of tax benefits though the government will surely claw back some in a search for more revenue
- 89% oppose not allowing individuals to make their own investment decisions though 70% and growing of new contributions are going into Target Date Funds (TDFs)
- 81% oppose being required to trade a portion of their retirement assets for a retirement income contract
- Close to eight in 10 households either “strongly” or “somewhat” disagreed that the government should require that people take part in a new government-sponsored pension plan.
No question that the combination of tax deferral and payroll deduction is effective in getting people to save but now we have to look at whether the system is preparing people for retirement and whether changes need to be made, especially with IRAs.
So while wildly popular among households, very few are very confident that they can meet retirement goals. Only 21% of all households feel very confident though 26% of those participating are very confident compared to just 14% not participating. I guess it’s about progress not perfection.
