Workplace DC Offering Key to Retirement Readiness

Research from the Employee Benefit Research Institute (EBRI) finds the risk level for an unprepared retirement declines the longer a worker is able to participate in a work-based DC plan. For instance, looking at someone in Gen X (born between 1965–1974) in the next-to-lowest income quartile, eligibility in a DC plan has a strong impact on retirement income adequacy: 58% of households eligible for DC plan participation less than one-quarter of future work years would be at risk at least 50% of the time, compared with only 21% for those eligible at least three-quarters of future work years, EBRI reported.  

EBRI’s analysis notes that retirement income adequacy in the future depends on a number of factors, including the assumed retirement age, participation rates, employee contribution rates, employer matching formulae, employer non-elective contributions, asset allocation, job turnover, cashout rates, and rates of return.  

However, Jack VanDerhei, EBRI research director and author of the report, said: “A crucial factor in workers’ ability to achieve future retirement income adequacy is their eligibility to participate in a defined contribution plan.”