Critics of 401(k) plans say the system is broken, but until they come up with a better alternative this is the chief investment vehicle for many individuals. And according to a new survey of business owners and workers released Wednesday by the Transamerica Center for Retirement Studies, the majority of folks are okay with 401(k)s.
The overwhelming majority of workers (89 percent) consider their 401(k) plan to be an important benefit, while 84 percent of employers believe their employees view their plans as important. Sixty percent of employees and 53 percent of employers said these benefits are “very important.”
And access to a 401(k) or similar plan encourages people to save more money. According to the survey, 90 percent of workers who are offered a 401(k) or similar plan by their employer are more likely to save and invest for retirement in the plan and/or outside of work versus 48 percent of people who don’t have access to such plans—a finding that’s consistent by company size.
Among other survey tidbits:
• 74 percent of employers say that offering a 401(k) or similar plan is important for attracting and keeping workers.
• Retirement plan sponsorship rates increase with company size.
• Matching contributions are more common in large companies.
• Among workers who are currently participating in an employer-funded plan, 23 percent have taken a loan and/or early withdrawal from their 401(k) or IRA, primarily due to a lack of emergency savings, insurance coverage or to pay off consumer debt.
Despite the overall warm fuzzies toward 401(k)s felt by employees and their bosses, many employees still don’t get the red carpet treatment regarding these plans. For example, 74 percent of companies offer a 401(k) or similar employee-funded plan, but only 38 percent of employers that offer a plan extend eligibility to their part-time workers.
“In the current public policy dialogue on how to increase workplace-based retirement savings programs among American workers, providing coverage to part-time workers is a tremendous opportunity,” states the report titled “The Current State of 401(k)s: The Employer’s Perspective.”