The increasingly dominant vehicle for private, employer-sponsored retirement savings for the last thirty years has been the defined-contribution plan. For the sake of simplicity, I will refer to all employer-sponsored defined-contribution plans as 401(k)s, as other plans such as 403(b)s or 457 plans are in the minority and do not differ significantly from 401(k)s for the purpose of this Outlook. Congress established and refined tax-favored 401(k)s--so called because they are defined in section 401(k) of the Internal Revenue Code--in the late 1970s and early 1980s, leading to their steady rise in popularity. (1) In 2009, 49 million American workers were active 401(k) participants, and 401(k) assets totaled $2.8 trillion, accounting for 17 percent of all retirement assets. (2) Other employer-provided defined-contribution plans, such as 403(b)s, accounted for approximately 8 percent of all retirement savings in 2009, while Individual Retirement Accounts totaled roughly 26 percent. The remainder of retirement assets was held in private defined-benefit plans (13 percent), government pension plans (26 percent), and annuities (9 percent). (3)
