NCPA - National Center for Policy Analysis

Investment In 401(k) Plans

October 31, 1995

Federal pension laws are out of sync with the reality of modern working conditions and should be overhauled.

The problem is that tax-deferred retirement accounts such as 401(k) plans were designed for workers at large companies who stay with the same employer for decades.

And because the pension laws are complicated, small businesses can't afford the paperwork and legal overhead involved.

  • The average American worker changes jobs about every seven years.
  • While 45% of employees at companies with more than 50 workers are enrolled in 401(k) retirement plans, only 22% of workers in companies with fewer than 50 workers are.
  • Federal law only permits a $2,000 tax-deductible contribution per worker each year to an individual retirement account, compared with more than $9,000 to a 401(k) plan.

At current savings levels, average baby boomers will find they are 60% short of the savings needed for an adequate retirement, according to actuarial studies.


Browse more articles on Economic Issues