401(k) Pension Plans:

Many Take Advantage of Opportunity to Ensure Adequate Retirement Income

HEHS-96-176: Published: Aug 2, 1996. Publicly Released: Aug 2, 1996.

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Pursuant to a congressional request, GAO provided information on 401(k) pension plans, focusing on: (1) the proportion of workers covered by 401(k) pension plans; (2) workers' contributions to their 401(k) pension plans; and (3) how workers invest their pension account balances.

GAO found that: (1) half of all workers and nearly two-thirds of workers nearing retirement age are covered by a pension plan; (2) one in four workers participates in a 401(k) pension plan; (3) male, white, highly educated, and higher-income workers are more likely to have pension coverage than any other group; (4) one-third of the workers eligible to participate in 401(k) plans do not participate in these plans; (5) union members are more likely to have pension coverage than nonunion workers; (6) more than 70 percent of all workers employed by large firms are covered by at least one pension plan; (7) workers without a high school diploma are unlikely to be covered by a pension plan and fewer than half of the high school dropouts nearing retirement age have no pension coverage; (8) 60 percent of college graduates have pension plans; (9) 60 percent of retirement age workers with incomes less than $25,000 are not covered by a pension plan and rely on Social Security as their primary source of income after retirement; (10) higher-income workers contribute more to their pension plans than lower-income workers; (11) 25 percent of 401(k) participants invest their funds in bonds, another 25 percent invest in stocks, and the remaining participants split their investments between both stocks and bonds; (12) women invest their 401(k) funds more conservatively than men; and (13) workers investing their 401(k) balances in stocks have greater retirement incomes.

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