In recent weeks, there has been much talk about a “retirement crisis,” with questions raised about the efficacy of the 401(k) and some even suggesting its elimination. While there are legitimate concerns about Americans’ savings for their postwork years, the hyperbole obscures the reality that the 401(k) system has been one of our most successful, bipartisan public-private initiatives.

Amid the recent criticism, it’s essential to highlight the 401(k) system’s positive outcomes and pending improvements, which will broaden access and encourage greater savings, bringing financial security to more Americans.

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The numbers don’t lie. According to Investment Company Institute (ICI) data, today, more than 110 million American workers and retirees have amassed some $9 trillion in wealth, using these plans as savings vehicles or as drawdown instruments to help support them in their golden years.

While many like to look back to when pensions were the primary retirement saving vehicle, before the 401(k), only approximately 28% of workers had retirement savings. What’s more, they were heavily dependent on their personal savings and Social Security as retirement income sources. Moreover, new plans for alternative retirement offerings, such as Thrift Savings Plans, are based on models that severely limit access to the potential upside offered by the investment options available in the 401(k) in the name of limiting risk. This is a case of giving with one hand while taking away with another.

Federal Reserve data shows that among families with retirement savings, the mean value of retirement accounts nearly tripled over 30 years on an inflation-adjusted basis. During that period, retirement savings for middle-income families more than doubled, and lower-middle-income and lowest-income families experienced similar dramatic increases in retirement savings: 183% growth and 207% growth in mean account value, respectively.

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Just as important is that retirement planning has become synonymous with employment for many Americans. A survey conducted in 2023 found that 75% of respondents with household incomes under $30,000 who owned a 401(k) agreed that their employer-sponsored retirement account helps them think about the long term and not just current needs. That figure rises to 91% for those with household incomes from $30,000 to $49,999 and 86% for those from $50,000 to $99,999.

Another aspect of the 401(k) system that has come under fire is the tax advantages. Critics have said that the tax incentives have only served to make the rich richer. However, an ICI survey indicates that 68% of those with a household income under $30,000 and 78% with household incomes from $30,000 to $99,000 agreed that the tax treatment of their retirement plan is a big incentive to contribute. Policy proposals eliminating 401(k) tax advantages should not be taken seriously; Americans need greater incentives to save, not fewer.

The truth is the 401(k) of 2024 is nothing like the 401(k) of 1984. Successful policy improvements like the SECURE Acts have driven great innovation into the workplace retirement system. Empower’s research shows that in the four years since the passage of the Secure Act, the number of U.S. households in the poorest income brackets who have entered the 401(k) system has grown by 25%.

These laws have also paved the way for innovations, including auto-enrollment, multiemployer plans, tax incentives to promote plan creation and numerous other improvements. Guaranteed lifetime income offerings built around products like annuities are also gaining traction. These products help to safeguard against the risk of running out of savings before the end of one’s life and will go a long way to address concerns raised in recent critiques.

With the cost of living rising, making saving harder, and Americans living longer than ever before, it is good that we are looking critically at whether we can improve the retirement system to support savers of all income levels better. But the 401(k) isn’t a panacea and shouldn’t be the sole solution.

The history of the retirement system is one of continuous improvement, with policymakers working together with retirement providers. We need more incentives for Americans to save and ways for them to do so; the next Congress and the executive branch need to prioritize continuing to evolve the 401(k) system while also addressing Social Security. This offers the best chance to help more Americans create financial security.

Edmund F. Murphy III is the president and CEO of Empower, a provider of retirement and wealth management services to more than 18 million Americans. 

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