Spark Institute: Investors prefer 401(k) plans to government bonds

Most investors don’t want to see employer-sponsored retirement plans replaced with government bonds, according to a white paper issued yesterday by The Spark Institute, a retirement services industry organization.
The institute released the paper at the same time that lawmakers on Capitol Hill were debating structural and regulatory changes to employer-sponsored 401(k) retirement plans.
In a survey of 3,000 households, conducted in the fourth quarter of last year by the Investment Company Institute, 75% of participants said that they don’t want to see existing retirement accounts replaced with government bonds. Also, 85% said that they didn’t want the tax advantages of retirement accounts taken away.
“Employer-sponsored retirement programs, particularly 401(k) plans, have been under attack for the last two years, based on many myths, misperceptions and misunderstandings,” Larry Goldbrum, general counsel of the Simsbury, Conn.-base Spark Institute, said in a statement.
The 401(k) plan system is successful in encouraging people to save for retirement and fundamentally sound, he added.
Since 1997, the number of employers that offer a 401(k) plan grew to nearly 493,000. There were nearly 73 million plan participants as of Dec. 31, Spark found.
In addition, a 2008 survey by Boston Research Group Inc., a Hopkinton, Mass.-based market research consulting firm, found that the average participation rate in 401(k) plans was 77% and participants contributed an average of 6% of their pay.
And despite the recession, just 3% of participants stopped contributing last year, the Washington-based ICI reported.
Spark recommended that policymakers focus on making the retirement system stronger. “Changes can be readily made without abandoning the current system,” the report said.