Workers who save in 401(k) plans generally like the tax perks and employer matching contributions these accounts often provide. But many employees remain skeptical that a 401(k) alone will propel them to a secure retirement.
Only about half (55 percent) of 401(k) participants are satisfied with their retirement benefits, according to a Harris Interactive survey of 1,134 employees at small and mid-sized companies commissioned by Principal Financial Group. In contrast, 64 percent of the 229 workers with a traditional pension were satisfied with their retirement plan, the most of any type of employer-provided benefit. But 401(k)s are far from the least popular employee perk. Less than half of workers are satisfied with their health insurance (48 percent), vision insurance (46 percent), dental insurance (43 percent), and stock options (43 percent).
Most workers (66 percent) say having access to a 401(k) at work is important to them, second only to health insurance, which 87 percent ranked as important. But many workers would like to see both their health insurance (43 percent) and 401(k) plan (14 percent) improved upon.
Retirement savers generally strive to save as much as possible in their 401(k), typically because they realize the importance of saving for retirement (83 percent) and want to take advantage of the employer match (59 percent). Other reasons workers utilize this retirement perk include opportunities for investment (51 percent), tax benefits (49 percent), and the ease of automatically participating (49 percent).
However, some people can’t afford to or don’t want to utilize a 401(k) when it is offered. Most people who don’t save in their 401(k) plan at work say they lack the financial resources to contribute to the plan (48 percent) or are focusing on other short-term savings goals (10 percent). Some employees also say they are too uncomfortable with investing to participate (19 percent) or don’t understand how the plan works (10 percent).
When employees were asked what benefits they would most like their employer to begin offering, traditional pension plans topped the list with 24 percent of workers desiring a guaranteed retirement payout for life. Traditional pensions were a more coveted workplace benefit than flexible work schedules (13 percent) and profit sharing or bonuses (10 percent). Only 6 percent of those surveyed are hoping their employer will add a 401(k) plan.
Most employees (48 percent) say the current 401(k) system is only somewhat effective in helping them achieve adequate retirement savings or not at all effective (7 percent). Just 18 percent of the survey responds say their 401(k) is extremely or very effective in helping them to prepare for retirement.