Research

401(k) Plans: A Failed Experiment

April 9, 2016
401(k) Plans: A Failed Experiment Pixabay pixabay.com

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.

Authors: Teresa Ghilarducci, Bridget Fisher, Siavash Radpour, Anthony Webb
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