Since 2009 when My Solo 401k was first established, we have seen the number of new solo 4o1k plan clients increase by over 20% each year, so it is not surprising that on August 5, 2019 the Investment Company Institute (ICI) released a study where they found nearly two-thirds of workers between ages 26 and 64 participate in an employer plan, either directly or through a spouse.
Here are Some Findings From the Study
- When you don’t take into account younger an lower-income workers, the participation rate rises to more than three quarters (78%).
- Younger workers and lower-income workers delay saving for retirement for the following reasons:
- Younger workers are typically focused on saving for goals other than retirement, such as saving to buy a house, pay for education, or start a family. They may rationally choose to delay saving for retirement until they’re older, when earnings are typically higher and they have taken care of other priorities.
- Workers who remain low income throughout their careers may rationally choose not to save for retirement at any age, as it would reduce the resources available to address more immediate financial needs, and Social Security benefits alone will replace a high percentage of their earnings.
- However, as the workers get older participation in employer plans increases. Thu study shows that 55 percent of workers between the ages of 26 to 34 either participated in an employer plan or had a spouse who participated. This rate increases to 69 percent for workers who were 45 to 64 years old.
How Much You Make Drives Participation
Not surprisingly, the study finds that higher-earning workers are more likely to participate in an employer plan. Among workers between 26 and 64 years old in 2016, participation wen up based on the following:
- 22 percent for those who earned less than $20,000
- 67 percent for those who earned $40,000 to $50,000
- 85 percent for those who earned $100,000 or more