Will Workers Without 401(k)s Be Able to Retire?

Employees with and without retirement accounts both feel insecure

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If you have access to a 401(k) plan, consider yourself among the more fortunate half of the population. Only about half of Americans have access to any type of retirement plan at work. Unless employees without a 401(k) are saving on their own, they will almost certainly be worse off in retirement than workers who are offered a 401(k) by their employer.

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Workers with a retirement account at work generally start saving for retirement at age 28, two years earlier than those without a 401(k), according to a new Transamerica Center for Retirement Studies and Harris Interactive online survey of 3,598 for-profit workers age 18 and over. Those with a 401(k) are more likely to be planning and investing for retirement. Some 61 percent of workers with 401(k)s have a retirement strategy compared to 40 percent of those without a 401(k).

Workers with an employer sponsored retirement plan are also more likely to save money for retirement outside of work than those without 401(k)s. Some 66 percent of workers with a 401(k) are also saving for retirement in an IRA, mutual fund, or bank account, compared to 57 percent of workers without a 401(k).

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However, employees with 401(k)s or other retirement accounts are only slightly more optimistic about their ability to retire comfortably. Just over half (53 percent) of workers with an employee-funded plan are confident about being able to retire with an adequate lifestyle compared to 43 percent of their 401(k)-less counterparts. Large majorities of workers with and without 401(k)s agree that they could work until age 65 and still not have enough money saved to meet their retirement needs (66 percent and 73 percent respectively). About 47 percent of workers without a 401(k) think they will need to work until age 70 or later or never retire, compared to 37 percent of employees with 401(k)s.

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Part-time employees, workers at small companies, and younger workers were less likely to have access to a 401(k). Workers without 401(k)s generally had more modest savings goals. The median worker without a 401(k) aimed to save $500,000 before retiring, compared to $800,000 among those with 401(k)s. Workers with an employee-funded plan typically expect their 401(k), 403(b), or IRA accounts to be their primary source of income during retirement, while workers without a plan are more likely to expect Social Security to be their largest source of retirement income.