Retirement savings vehicles, such as IRAs and 401(k)s, offer workers the opportunity to save for retirement using pre-tax dollars. Do workers use these plans? What persuades workers to participate in these plans?
Who Participates--How Much Do They Contribute?
According to the RCS, 76 percent of workers offered a 401(k) or similar retirement saving plan at work contribute to the plan. Of participants
Why Don't People Contribute?
Those not contributing at all say they:
Funds Are Mostly for Retirement.
Only 18 percent of 401(k) or similar plan participants report that they intend to tap into their retirement savings for purposes other than retirement, such as borrowing to purchase a house. The younger the workers, the more likely in general they are to say they will do so.
Employer-Provided Educational Programs and Materials Work.
Two-thirds of plan participants report that their employer has provided them with educational material or seminars regarding the plan in the past 12 months.
IRAs: High Nonparticipation and a Lack of Understanding.
The overwhelming majority of those currently eligible to make deductible IRA contributions do not contribute. Why not? Part of the reason may be as simple as a lack of understanding regarding IRA eligibility and usage rules.
Source: 1997 Retirement Confidence Survey.