New survey results show that a strong majority of Americans have a favorable impression of defined contribution plans and disagree with potential changes affecting current tax features.
According to the Investment Company Institute’s updated study, “American Views on Defined Contribution Plan Saving, 2020,” 87% of survey respondents disagreed that the government should take away tax advantages of DC accounts.
Moreover, 89% of all individuals surveyed disagreed with reducing the amount that individuals can contribute to DC accounts—a finding that is common even among those who do not currently have DC accounts or IRAs. In this instance, 79% of individuals without DC accounts or IRAs also rejected the idea of taking away the tax treatment of DC accounts, further reinforcing the notion that Americans strongly support retaining this core incentive for saving through DC plans.
Overall, 86% of DC-owning individuals agreed that “the tax treatment of my retirement plan is a big incentive to contribute.” The ICI notes that agreement was high across all age and income groups, although it tended to increase with age and was a bit higher for individuals with household incomes of $50,000 or more (88%) than for individuals with household incomes below $50,000 (77%).
And if that weren’t enough, nearly half of respondents indicated that they probably would not be saving for retirement if not for their DC plans at work. In addition, saving paycheck-by-paycheck made more than 8 out of 10 DC-owning individuals surveyed less worried about the short-term performance of their investments.
Confidence and Support
A majority of Americans are also confident that 401(k)s and other DC retirement accounts can help meet their retirement goals. The ICI found that 76% of respondents had favorable impressions of 401(k) and similar retirement plan accounts.
Not surprisingly, confidence in DC plan accounts was highest among individuals whose households owned DC accounts or IRAs, with 83% indicating that they were confident the accounts could help people meet their retirement goals. Still, 70% of individuals who did not own either DC accounts or IRAs also expressed confidence that DC plan accounts can help people meet their retirement goals.
“Time and again, this research finds that Americans appreciate and benefit from the key features offered by DC plans, making them popular and powerful retirement savings vehicles,” notes Sarah Holden, ICI’s senior director of retirement and investor research. “Survey respondents report that payroll deduction of contributions makes it easier for them to save, while the flexibility, control, and access to a good lineup of investment options that these plans offer give these savers the opportunity to invest to build their retirement nest egg.”
DC-owning individuals particularly appreciate the saving and investing features of DC plans. According to the findings, more than 9 in 10 individuals with DC accounts (91%) agreed that these plans encourage them to think about the long-term, and 9 in 10 agreed that payroll deduction makes it easier to save for retirement.
Similarly, most individuals with DC accounts (96%) agreed that it is important to have a choice in—and control of—the investments in their DC plan accounts and 87% of DC-owning individuals appreciate the array of investment options that their employer-sponsored retirement plan offers.
As the 13th edition in this series, ICI’s report summarizes results from a nationally representative survey of 2,092 individuals aged 18 or older in the United States 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 administered by NORC at the University of Chicago using the AmeriSpeak probability-based panel, with responses collected during November and December 2020.
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