401(k) Plans: A Failed Experiment

Teresa GhilarducciBridget FisherSiavash RadpourAnthony Webb
Written By SCEPA

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Inadequate wealth accumulations reflect well-known design flaws in the 401(k) system.

The first birth cohort exposed to the 401(k) system for most of their working lives is now approaching retirement. 401(k) participants in this cohort have accumulated only about a third of the savings they need to maintain their standard of living in retirement. The 401(k) system fails even those who use it as instructed. High earners are as ill-prepared for retirement as low-and moderate earners. Inadequate wealth accumulations reflect well-known design flaws in the 401(k) system – patchy coverage, high fees, opportunities to take pre-retirement withdrawals, and the lack of a default pathway for converting accumulated wealth into retirement income.

SCEPA
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