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Non-retirees Prefer 401(k) to Pension

Asked to choose between a 401(k)-type plan or a company pension plan that provides guaranteed income in retirement, a slim majority of non-retirees chose the 401(k).

The response came to a new question as part of the fourth-quarter 2014 Wells Fargo/Gallup Investor and Retirement Optimism Index. Just over half (52%) of respondents chose “a 401(k)-type plan that you control and invest in, and which the company may contribute to, with the payout dependent on your plan’s performance,” while 46% opted for “a company pension plan that provides you with a guaranteed income in retirement, with the payout dependent on your salary and how long you worked for your employer.” 

In fact, non-retired investors say that after health care benefits, a retirement savings plan such as a 401(k) is the most important benefit their employer provides (61%), exceeding paid time off or sick leave (23%), life insurance (5%) and stock options (4%). 

About one in four (27%) say they rely on a professional advisor outside of work, and another 39% rely mainly on themselves or a friend or family member for help. Just 22% say most of their advice comes from the financial firm that runs their 401(k) plan, while about 1 in 10 (11%) say they seek advice from their company’s benefits department or another financial professional where they work. 

Three-quarters would be in favor of a new employer automatically enrolling them in a 401(k) plan at the start of their employment, and 66% would want their employer setting up automatic increases for their contributions. But fewer than half would favor their employer automatically rebalancing their investments each year (44%) or automatically making age-appropriate investment choices for them (41%). 

More than six in 10 (69%) non-retired investors have access to an employer-sponsored 401(k) plan, and 96% of those with access are actively contributing to their plan. Eighty-six percent say that their employer matches some part of their contributions, and 81% say this is “very important” in helping to save for retirement. 

When asked how much they blame various factors for why Americans aren’t saving enough for retirement, a majority (80%) of investors say it comes down to Americans “delaying” the process of saving for retirement and that Americans are having a hard time paying the day-to-day bills. 
Among those who are saving, the average age at which non-retirees say they started saving is 29, although 4 in 10 (45%) non-retirees started saving at age 30 or older. 

Relatively few workers who participate in their employer’s 401(k) plan report they have taken out a 401(k) loan (16%) that in the past five years. Even fewer, 9%, have taken an early withdrawal from the plan. However, 21% of investors with a 401(k) have done at least one of these things, including 5% who have done both.