Most households favor retaining tax incentives for DC plans: ICI survey

A strong majority of U.S. households favored preserving tax incentives for 401(k) plans and other defined contribution (DC) plans, according to a recent survey released by the Investment Company Institute (ICI). The survey, conducted from mid-November 2013 through mid-December 2013, covered a total sample of 3,021 American adults. Survey results are weighted to be representative of U.S. households by age, income, region, and education level.

General views on DC plans

The survey found that two thirds (66%) of U.S. households had favorable impressions of 401(k) and similar retirement plan accounts in Fall 2013, similar to the level found in 2012/2013. Among households expressing an opinion, 92% had favorable impressions of 401(k) plans, with 46% holding a “very favorable” impression.

About nine out of 10 households with DC accounts agreed that these plans helped them think about the long term and made it easier to save. More than four in 10 DC-owning households indicated they probably would not be saving for retirement if not for their DC plans. In addition, saving paycheck-by-paycheck made 68% of DC-owning households surveyed less worried about the stock market.

In addition, nearly nine in 10 DC-owning households said the tax treatment of their retirement plans was a big incentive to contribute. Almost all households with DC accounts agreed that it was important to have choice in, and control of, the investments in their DC plans and 86% indicated that their DC plan offered a good lineup of investment options.

Views on proposed changes to DC plans

A strong majority of U.S. households surveyed disagreed with proposals to remove or reduce tax incentives for retirement savings.

The survey found that 86% of households disagreed that the government should take away the tax advantages of DC accounts and 83% disagreed with reducing the amount that individuals can contribute to DC accounts. Support for these tax incentives was widespread even among households not owning DC accounts or individual retirement accounts (IRAs) – 81% of households without DC accounts or IRAs rejected the idea of taking away the tax treatment of DC plans.

In addition, 86% of households were opposed to not allowing individuals to make investment decisions in their DC accounts and more than eight in 10 disagreed with replacing all retirement accounts with a government bond.

Confidence in DC plans

Households—whether they had retirement accounts or not—were generally confident in DC plans’ ability to help individuals meet their retirement goals, according to the survey. Among households owning DC accounts or IRAs, more than eight in 10 indicated they were confident that such accounts could help people meet their retirement goals. Among households not owning DC accounts or IRAs, nearly two-thirds expressed confidence that such accounts can help people meet their retirement goals.

Source: “Americans’ Views on Defined Contribution Plan Saving,” Investment Company Institute.

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