A recent study discovered that those who do not participate in defined contribution (DC) plans, like 401(k), may be more vulnerable to running out of money in retirement than those who do.
According to Morningstar research, 21% of individuals who anticipate participating in a DC plan for at least 20 years anticipate running out of money, compared to 57% of non-participants.
Typical DC Plan Errors To Avoid The Morningstar analysts stated that "plan participation matters because Americans who participate in a DC plan are much more likely to save for retirement than workers who do not participate."
1. Even though joining a DC plan is frequently fairly easy, hardly everyone does. A little over half of employees genuinely participate in company retirement plans, despite the fact that most have access to them.
73% of employees had access to a workplace retirement plan as of March 2023, but only 56% of them took advantage of it. 2. The advantages of possessing a 401(k) could also be nullified in the event that you frequently withdraw funds ahead of schedule and incur penalties and taxes for doing so.