73% Believe Retirement Possible via 401(k)s

Seventy-three percent of 3,000 people that the Investment Company Institute polled said they are confident they will be able to retire, thanks to their 401(k) savings, and 90% gave a thumbs-up on the plans, citing their tax advantages, convenient payroll deductions, choices, control and the financial discipline they instill.

Among those invested in a defined contribution plan, the confidence level rises to 79%. Another 85% said they are happy with the investment choices available in their plan.

“We have found that Americans express confidence in their 401(k) plans and support the system’s key features in overwhelming numbers,” said ICI President and CEO Paul Schott Stevens. “The 401(k) system has a long and productive future ahead in providing retirement security for millions and millions of Americans.”

In addition, the ICI found that through September of 2009, 95% of 401(k) participants were still contributing to their plans, and only 10% changed the asset allocation of their contributions and existing portfolios. In line with historical norms, only 2.6% took withdrawals, 1.3% hardship withdrawals and 16.8% had loans outstanding.

In conjunction with the release of the report, “Enduring Confidence in the 401(k) System: Investor Attitudes and Actions,” Vanguard released data showing that in the third quarter of 2009, 60% of its 401(k) investors’ balances were back to where they had been in 2007—defying the tremendous pullback that occurred throughout 2008 through March 9, 2009. Among target-date fund investors, the recovery rate rose to 70%.

“Investors largely stayed the course and recovered through the combined power of regular savings, diversified portfolios and the sharp stock market recovery since March 2009 lows,” said Vanguard Chairman Emeritus John J. Brennan.

Ariel Investments President Mellody Hobson also spoke, on the disparity between whites’ and minorities’ savings, opining, “The best way to expand the reach of savings for all Americans is financial literacy, education and opportunity. The industry looks forward to working with Congress and regulators to find effective solutions that best serve American investors and savers.”