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Americans highly value their retirement plans, according to new research published by the Investment Company Institute: ICI’s report “American Views on Defined Contribution Plan Saving, 2024” finds that almost three-quarters (72%) of Americans had favorable impressions of 401(k) and similar defined contribution plan accounts – and the tax incentives.
“Employer-sponsored DC plans have helped American workers achieve long-term saving goals for decades with favorable features like employer contributions, a strong lineup of investment options that are diversified and cost-effective, and tax-deferred growth. A vast majority — 85% — of DC plan participants find that the tax treatment of their plans is a big incentive to contribute,” said Sarah Holden, ICI Senior Director of Retirement and Investor Research.
“It’s important when discussing changes to our retirement system for policymakers to note that current plans are working for millions of Americans. Most Americans, whether they currently have retirement accounts or not, have confidence in DC plans as they are and do not support any changes.”
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The research comes as Congress considers the expiring provisions of the 2017 Tax Cuts and Jobs Act. Policymakers must protect Americans’ ability to save for their futures by ensuring the tax treatment Americans rely on for retirement savings isn’t used as a “pay-for” to finance other government spending or tax changes, according to the ICI.
It is likely Congress will consider a renewal of the Tax Cuts and Jobs Act, and will be extended beyond 2025 since it was a hallmark of President Trump’s first term. If extended, retirees benefit from lower income tax rates, which could increase disposable income and savings potential. The TCJA also delivered tax relief for middle-income Americans by doubling the standard deduction and lowering rates for those who need it most, boosting retirement savings.
In January, the ICI, a trade association representing mutual funds, exchange-traded funds (ETFs) and other regulated investment funds, launched a grassroots campaign called Help U.S. retire, hoping to mobilize 120 million American investors that use mutual funds and ETFs as long-term savings vehicles to build a grassroots network to amplify their voices to Congress.
A strong majority of Americans disagreed with proposals to remove or reduce tax incentives for retirement savings: 85% disagreed that the government should take away the tax advantages of DC accounts, and 86% disagreed with reducing the amount that individuals can contribute to DC accounts. Disagreement was higher among those with retirement accounts.
Related: Help U.S. Retire: Industry trade group launches grassroots campaign to put Congress on alert
An overwhelming majority of DC plan participants agreed that their DC plan helps them think about the long-term and makes it easier to save. Almost half also indicated that they would probably not be saving for retirement if not for their DC plans at work. Most (92%) DC-owning individuals agreed that it was important to have choice in and control of the investments in their plans. More than eight out of 10 DC-owning individuals (83%) indicated that their DC plan offered “a good lineup of investment options.” DC plans not only facilitate saving but also investing.
Across the adult U.S. population more generally, nearly nine out of 10 (86%) individuals surveyed disagreed with the idea of not allowing individuals to make investment decisions in their DC accounts, and nearly eight out of 10 (77%) disagreed with investing all retirement accounts in an investment option selected by a government-appointed board of experts.
In addition, saving paycheck-by-paycheck made nearly eight out of 10 DC-owning individuals surveyed less worried about the short-term performance of their investments.
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
