The analysis from the Washington, D.C.-based Employee
Benefit Research Institute (EBRI) finds that, assuming current Social Security
benefits are not reduced, 83% to 86% of employees with more than 30 years of
eligibility in a 401(k) retirement plan could have sufficient funds to replace
at least 60% of their age-64 wages and salary.
When the threshold for a financially successful retirement
is increased to 70% replacement of age-64 income, the analysis finds
that 73% to 76% of the employee set will still meet that threshold through 401(k) assets and Social Security payments combined. At an 80% replacement rate, the analysis
finds that 67% of the lowest income quartile will still meet the threshold if they have had 30 years of access to a 401(k).
Automatic enrollment in 401(k) plans can also play a role in
successful saving for retirement. The EBRI analysis examines auto-enrollment with
an annual 1% automatic escalation provision and empirically derived opt-outs, and
finds that the probability of success increases substantially for employees in those plans, as follows:
- Between 88% and 94% could potentially achieve 60%
- Between 81% and 90% could achieve a 70% replacement
- Between 73% and 85% could achieve an 80% threshold.
EBRI notes that the use of auto-enrollment as a
plan feature has grown significantly since the enactment of the Pension
Protection Act of 2006.