Looks like 401(k)s have fallen out of favor when it comes to saving for retirement--and the Great Recession is to blame.
In 2008, the major U.S. equity indexes tumbled far into the red, with the S&P 500 Index losing 37% for the year, which translated into hefty losses for workers’ 401(k) retirement plan assets. Now, with that memory still fresh, fewer people say they plan to rely on these plans to fund their lifestyle in retirement.
Before the Great Recession, most Americans said they planned to rely on their 401(k), IRA, Keogh or other retirement savings when they left the workforce, according to a new poll from Gallup. Today, only 48% say they would use these savings in retirement, and numbers have yet to rebound to where they were before the 2008 sell off.
Respondents said they would be using IRAs, CDs, savings accounts and more, in addition to their 401(k) plans.
With retirement being the top financial worry for 59% of Americans, according to Gallup, it’s not surprising to see more people considering what their finances will look like post-retirement.
Gallup surveyed 1,026 Americans by phone for the report.
In April 2008, Gallup found 54% of Americans who had yet to retire expected they would rely on their 401(k) plans as a major income source in their golden years. This fell to 42% in 2009, and has been slowing climbing back over the past several years, as have many 401(k) accounts as Wall Street experiences a strong bull market.
Gallup also finds that the percentage of nonretired Americans who plan to rely on their 401(k) accounts is actually much higher than the percentage of those who actually do so, at 22%.
Nonretirees are also realizing that Social Security may not be available to play a real role in their retirement plan. In the past 12 years, Gallup finds that between 50% and 61% of retirees have considered this a major source of income. On the other hand, between 25% and 34% of those who are not yet retired say they expect it to be a reliable income source post-retirement.
But, 51% of those who are nonretired say they will look to Social Security as a “minor” source of income, considering it is still guaranteed for most working Americans, Gallup reports.