As reported here, the Great Recession apparently has spooked some Americans from relying on their 401(k)s. As the article notes: 

Before the Great Recession, most Americans said they planned to rely on their 401(k), IRA, Keogh or other retirement savings when they left the workforce, according to a new poll from Gallup. Today, only 48% say they would use these savings in retirement, and numbers have yet to rebound to where they were before the 2008 sell off. 

Respondents said they would be using IRAs, CDs, savings accounts and more, in addition to their 401(k) plans.

This is an interesting result, given that 59% cite having enough money in retirement as a top financial worry. 

Yes, it’s true that 401(k)s, like every other investment-type account, took a nose dive in the Great Recession.  However, this study from the Employee Benefits Research Institute shows that 401(k) balances were actually higher as of the end of 2011 than they were pre-recession.  Yes, some of that is due to additional contributions, but to say the numbers “have yet to rebound” is not accurate.

The results also bespeak a misunderstanding of proper retirement savings.  It is possible that this seeming disconnect is the result of a lack of understanding on the part of participants – understanding of the need for long-term investing to retirement, the markets, the tax  law, the benefits of pre-tax savings, the opportunity presented by company matching contributions, and more.  Self-directed IRAs are just as susceptible to market fluctuations as 401(k)s. 

Additionally, over the long term, CDs and savings accounts are unlikely to provide the kinds of returns necessary for a full retirement income, but Americans are generally not well-enough educated in these matters to understand the variations and the impact on their ultimate ability to save satisfactorily for retirement.

So what’s the answer?  It’s probably not the same for every person, and it doesn’t necessarily mean putting all one’s eggs in the 401(k) basket, but abandoning the primary retirement-type plan available in the marketplace in favor of vehicles that are really no different or do not provide adequate returns is not the answer.  Could it better financial education for people of all ages?