Americans that have a 401(k) tend to like it. A lot. And they certainly don’t want the government kneecapping it by stripping away its tax benefits, according to new research from the Investment Company Institute (ICI).
ICI’s Sarah Holden
“85% of DC plan participants find that the tax treatment of their plans is a big incentive to contribute.”
ICI’s research report released Jan. 30, “American Views on Defined Contribution Plan Saving, 2024” finds that almost three-quarters of Americans had favorable impressions of 401(k) and similar defined contribution (DC) plan accounts.
“Employer-sponsored DC plans have helped American workers achieve long-term saving goals for decades with favorable features like employer contributions, a strong lineup of investment options that are diversified and cost-effective, and tax-deferred growth. A vast majority—85%—of DC plan participants find that the tax treatment of their plans is a big incentive to contribute,” said Sarah Holden, ICI Senior Director of Retirement and Investor Research.
Holden said it’s important when discussing changes to the retirement system for policymakers to note that current plans are working for millions of Americans. “Most Americans, whether they currently have retirement accounts or not, have confidence in DC plans as they are, and do not support any changes,” Holden said.
As Congress considers the expiring provisions of the 2017 Tax Cuts and Jobs Act, ICI is urging policymakers to protect Americans’ ability to save for their futures by ensuring the tax treatment they rely on for retirement savings isn’t used as a “pay-for” to finance other government spending or tax changes.
A strong majority of Americans disagreed with proposals to remove or reduce tax incentives for retirement savings. In fall 2024, 85% disagreed that the government should take away the tax advantages of DC accounts, and 86% disagreed with reducing the amount that individuals can contribute to DC accounts. Disagreement was even higher among those with retirement accounts.
To advocate for American retirement savers, ICI recently launched the “Help U.S. Retire” advocacy campaign intended to protect the retirement funds that middle-class Americans rely on to build their long-term financial security. The campaign will mobilize the 120 million American investors that use mutual funds and ETFs as long-term savings vehicles, building a grassroots network to amplify their voices to Congress.
ICI CEO and President Eric J. Pan spoke about the new campaign as well as the need to protect the tax treatment of defined contribution plans on the most recent edition of the 401(k) Specialist Podcast.
“One reason why a lot of people do participate is because our tax code incentivizes people to put money away. This is a formula that works,” Pan said on the podcast. “It’s tremendously successful. It’s a model for countries around the world.”
With President Trump back in office, 2025 is shaping up to be a very important year in Congress as taxes are one of the major issues that will be debated—particularly with debate on expiring provisions of the 2017 TCJA.
“We want to make sure that as Congress considers changes to our tax code, that retirement savings doesn’t become a bargaining chip. That the tax treatment that serves Americans’ retirement doesn’t end up becoming sacrificed in order to pay for other initiatives that Congress may be interested in paying for,” Pan added.
Strong support for DC plans
Among the key findings from the study:
- An overwhelming majority of DC plan participants agreed that their DC plan helps them think about the long-term and makes it easier to save. Almost half also indicated that they would probably not be saving for retirement if not for their DC plans at work.
- Most (92%) DC-owning individuals agreed that it was important to have choice in and control of the investments in their DC plans. More than eight out of 10 DC-owning individuals (83%) indicated that their DC plan offered a good lineup of investment options. DC plans not only facilitate saving but also investing.
- Across the adult U.S. population more generally, nearly nine out of 10 (86%) individuals surveyed disagreed with the idea of not allowing individuals to make investment decisions in their DC accounts, and nearly eight out of 10 (77%) disagreed with investing all retirement accounts in an investment option selected by a government-appointed board of experts.
The new ICI report, the 17th in this series, summarizes results from a nationally representative survey of Americans aged 18 or older. Read the full report, “American Views on Defined Contribution Plan Saving, 2024,” for more details and statistics.
SEE ALSO:
• ‘Help U.S. Retire’ Advocacy Campaign Launched by ICI
• 401(k) Specialist Podcast: Protecting the Rights of Retirement Investors with ICI Leader Eric J. Pan
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
