Principles of Risk Management and Insurance, 13th Edition

Problems and Issues in Tax-Deferred Retirement Plans

Although tax-deferred retirement plans have great potential in reducing economic insecurity during retirement, several serious problems must be resolved. They include the following:⁶

• Inadequate 401(k) and IRA account balances. The majority of households nearing retirement have 401(k) plans or IRAs to supplement their OASDI retirement benefits. Most participants, however, have inadequate assets in their accounts for a comfortable retirement. According to the 2013 Survey of Consumer Finances by the Federal Reserve, working households near retirement (ages 55 to 64) had median combined 401(k) and IRA assets of only $111,000.⁷ This amount is inadequate for most workers to maintain their present ...