Defined contribution retirement plans play a major role in Americans' retirement readiness, according to a report by the American Council of Life Insurers, American Benefits Council and Investment Company Institute.
DC plans, like 401(k) and 403(b) plans are a critical source of savings for millions of workers at all ages and income levels, the report found. When paired with Social Security benefits, the defined contribution system has helped improve U.S. retirement prospects over time.
The organizations found that almost 80 percent of full-time workers have access to employer-sponsored retirement plans, and more than 80 percent of workers with access to plans at work participate. They believe that with further refinements, coverage could be increased to benefit other workers as well.
Recommended For You
The authors of the study point out that near-retirees—those between ages 60 and 64—have an average combined 401(k) and IRA balance of nearly $360,000.
The way DC plans are set up, they work great for the country's transient workforce. They are portable and workers can take the assets with them when they switch jobs.
Despite recent market volatility, Americans are confident in the 401(k) system and appreciate its user-friendly features, including tax benefits, payroll deduction, having control over their own assets and having a choice of distribution options.
The study also found that retirement assets constitute a major share of U.S. households' savings and investments, providing more than $20 trillion in private investment capital for American businesses. Defined contribution plans make up $5.3 trillion of that amount.
Plan design changes that have become popular in the past couple of years, like automatic enrollment and auto escalation, have gone a long way toward improving retirement security in this country, the study said.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
