Americans Support Maintaining Retirement Plan Tax Incentives

April 9, 2012 ( - More than eight in 10 U.S. households believe the current tax incentives to encourage retirement saving should be preserved, according to research from the Investment Company Institute (ICI).

Specifically, the study found 85% of all U.S. households disagreed when asked whether the tax advantages of DC accounts should be eliminated. Eighty-three percent opposed any reduction in workers’ account contribution limits.   

Among households owning defined contribution (DC) accounts or individual retirement accounts (IRAs), nearly nine in 10 disagreed with eliminating or reducing the tax incentives.  

A vast majority of households agree that preserving the current retirement savings incentives should be a national priority. Eighty-eight percent of households owning DC accounts or IRAs agree with this policy priority, while 76% of households without DC accounts or IRAs agree.  

The ICI study—"America’s Commitment to Retirement Security: Investor Attitudes and Actions"—found that such agreement was consistently high across various demographic and financial characteristics.

Americans Have Confidence in DC Plan System  

The results of ICI’s study also revealed a number of key findings about U.S. households and DC-owning households. An overwhelming majority of DC-owning households find these plans promote retirement saving. Nine in 10 households with DC accounts agreed that these plans helped them think about the long term and made it easier for them to save. More than 80% of DC-owning households said the immediate tax savings from their retirement plans were a big incentive to contribute.  

Households continue to appreciate the key features—such as flexibility and participant control—of DC plans. In addition, households’ views on policy changes revealed a preference for preserving retirement account features and flexibility. Eighty-seven percent of households opposed the notion of not allowing individuals to make investment decisions in their DC accounts, and nearly eight in 10 disagreed with the idea of replacing all retirement accounts with a government bond.  

Investors greatly value the ability to choose and control their investments. Nearly all households with DC accounts agreed that it was important to have choice in, and control of, the investment options in their DC plans. Seventy-nine percent said their plan offers a good lineup of investment options.  

Households generally continue to have positive attitudes toward the 401(k) system: In 2011, 65% of all U.S. households had favorable impressions of 401(k) and similar plan accounts, compared with 64% in 2010. Nearly three-quarters of households expressed confidence DC plan accounts could help participants meet their retirement goals.  

The research is based on data collected in a survey of 3,000 U.S. households in November and December 2011.

DC Participants Continued Saving  

The ICI research also provides the results of a survey of DC plan recordkeepers covering nearly 24 million DC accounts during the first three quarters of 2011, and found from January through September 2011, DC plan participants continued to contribute to their 401(k) accounts. Only 2.2% of DC plan participants stopped contributions during these nine months, compared with 3.4% of participants during the comparable time period a year earlier.  

DC plan participants generally did not tap their accounts. Only 2.8% of DC plan participants took withdrawals during these nine months, with only 1.4% taking hardship withdrawals—a pace similar to the same time frame a year earlier.  

Loan activity was similar to the level observed last year. At the end of September 2011, the survey data indicated 18.4% of DC plan participants had loans outstanding, compared with 18.2% of participants at year-end 2010.  

The research report is available at

Rebecca Moore

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