Defined contribution plans like the 401(k)s and IRAs were introduced more than 30 years ago to create a more stable retirement for Americans.

A new study of brand-new retirees with such plans finds they are, indeed, faring well – but only thanks to an additional big lift from Social Security income and a willingness to economize.

“I think the message is it’s very possible to save in the 401(k) system and get to retirement in a good place,” says Anne Coveney, senior manager of thought leadership at T. Rowe Price, which conducted the study.


The results counter-balance a large new Urban Institute study, published the day before T. Rowe’s that found 35% of all Americans have debts that have gone into collections. It’s been heartening to find evidence of positive news about Americans’ financial states when it comes to retirement, Coveney says.

“The fact that they are satisfied is very positive,” she says, “but the second finding is they are making it work.”

The T. Rowe study looked at 1,507 Americans from the private sector who retired in the past five years with either a 401(k) or an IRA rollover account.

On average, respondents had accumulated substantial assets, the survey found. Recent retirees reported median household assets of $473,000, which included investable assets and home equity, while subtracting debt. Nearly half, or 48%, had $500,000 or more. Of their investable assets, 38% was in stocks and stock mutual funds, 13% was in asset allocation mutual funds, and 31% was held in cash.

More than eight in 10 (or 82%) said they own real estate with a median of $191,000 in home equity.


Yet despite these healthy numbers, Social Security accounted for the lion's share, or 43%, of their income. The second largest source, at 19, came from traditional defined benefit plans, followed by amounts withdrawn from personal savings and investment accounts including IRAs and defined contribution plans, at 18%.

Respondents represent a group of Americans who are in the process of moving from reliance on Social Security income to reliance on other defined retirement plans, Coveney says. “This group is transitioning.”  

Work is also a big part of the picture, she adds, with 21% of respondents working. Of those respondents, 16% were part-time, and 4% full-time. Another 14% said they were retired and looking for work.

Most said they had ratcheted down their spending and were no-less-satisfied for having done so, according to Coveney. “They are making it work,” she says.

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