Many Lessons Still Left to Learn to Maximize 401(k) Participation Rate

By Ted Gotsch 
Senior Policy Analyst, Content and Publications 

09/05/24

Retirement security is a growing concern for more and more Americans. It seems like a reasonable worry, given that a recent Motley Fool survey found the average household has only saved $87,000 toward their nest eggs. Solving the problem of future financial well-being remains a challenge for many. 

As pensions have virtually disappeared as a retirement savings option, many workers of all ages have turned to 401(k)s offered by their employers as an investment vehicle for their golden years. However, there are still many Americans who don’t contribute or fully understand how to best utilize this investment vehicle. 

In recognition of National 401(k) Day on Sept. 6, organizations like the Plan Sponsor Council of America encourage employers to talk to their employees about taking charge of their financial futures by participating in a 401(k). Offering educational resources, interactive tools, and personalized support can help workers maximize their contributions, make informed investment decisions, and fully leverage employer matching opportunities. 

Staying on top of all the latest 401(k) rules can be tricky, even for the most investment-savvy, due to recent changes in the law. In December 2022, President Biden signed SECURE 2.0, which encourages employers to offer retirement plan benefits to their workers while lifting some barriers to saving. Several states have also created their own retirement vehicles in recent years, hoping to encourage workers to put money away for the future.  

The need to encourage people to save is real. Too often, those looking to balance household budgets are faced with choices that lead to shortchanging their retirements. They may assume they will either make up the difference in the savings later or they will continue to work indefinitely. As a result, many in the financial industry are warning that the U.S. is facing a retirement crisis and it may come sooner than we think. 

The Academy is doing its part to address some of the issues and misunderstandings that everyone has—be they an employee, an employer, a policymaker, or a regulator. In June, our Retirement Policy and Design Evaluation Committee released a policy paper looking at how current retirement plan design elements and policies may inadvertently disadvantage racial and ethnic minority groups, as well as women and lower-income earners. The document makes several suggestions for policymakers to consider in addressing these issues through retirement plan design and policy changes. 

The Retirement Practice Council has also commemorated the 50^th anniversary of The Employee Income Retirement Security Act of 1974 (ERISA) through a series of events and issue briefs discussing options to shore up the nation’s retirement system.   

During an Academy-sponsored June symposium looking at the history and future of ERISA, Academy Retirement Vice President Jason Russell expressed optimism about the role the organization can play in firming up retirement savings. 

“I think we’ve got a great opportunity here to help employers help their employees have a secure retirement,” he said. “That’s really why I volunteer with the Academy—because of the dialogue we have with policymakers, understanding the interests of stakeholders, which can help everyone come to a sensible, practical decision that helps the public interest.” 

The Academy and our volunteers continue to evaluate proposals and analyze potential solutions to the big-picture and kitchen table issues that keep us all up at night. As we recognize National 401(k) Day this year, we are reminded that education and awareness are key pieces of the Academy’s public policy and professionalism mission. Talking about ways to help everyone save for retirement is incredibly important—as is finding ways to make it happen.