Over the past four decades, the 401(k) plan has evolved and grown to be the most common defined-contribution (DC) plan. This article explores how plan sponsors’ decisions with respect to plan design and investment offerings impact the financial experience of 401(k) plan participants over time. Millions of Americans are first introduced to investing through their 401(k) plans, and changes in 401(k) plan design impact the financial experience of 401(k) participants. Given that many households with rollover individual retirement accounts (IRAs) seek the assistance of financial advisors, the changes in 401(k) plan investors’ engagement with their accounts’ investments may change the financial background of these new advisory clients. This article provides insight into how American workers approach saving for retirement by explaining innovations in plan design and exploring how newer 401(k) plan designs impact participants’ investment experience in their 401(k) plans.
Author: Sarah A. Holden, PhD, is senior director of Retirement and Investor Research at the Investment Company Institute (ICI) in Washington, DC. At the Institute, Dr. Holden focuses on research on the U.S. retirement market, retirement and tax policy, and investor demographics and behavior. Prior to joining the Institute, Dr. Holden worked as a staff economist in the Flow of Funds Section of the Research Division at the Federal Reserve Board. She is a graduate of Smith College and holds a doctorate in economics from the University of Michigan.