Americans Want Their 401(k) Plans to Change

Americans are looking for options beyond the traditional 401(k) for funding their retirement, a new survey has found.

A PlanAdviser poll conducted in May among 2,153 401(k) plan holders showed a growing concern among American workers: Their 401(k) plans may not be enough to carry them through retirement.

An overwhelming 93 percent said it was important to have the option to convert their savings into guaranteed monthly income, and 67 percent said they would feel more confident about retirement if their plan included that option.

The results are consistent with other research that shows the American retirement landscape is due a change. A plethora of studies and polls have found that U.S. workers are becoming increasingly concerned about their ability to see themselves financially through their post-working years.

A recent study by Transamerica Center for Retirement Studies found that almost seven in 10 workers—69 percent—said they could work until retirement age and still not save enough to meet their needs. The Allianz 2025 Annual Retirement Study found that 64 percent of Americans were more scared of running out of money in retirement than they were of dying.

The stress of wondering how they will fare financially later in life is fueling Americans’ growing interest in guaranteed income. For many, a 401(k) account balance, even one that looks substantial, is no longer reassuring in an economy marked by volatility and inflation.

While a 401(k) allows a plan holder to invest over time and make withdrawals in retirement, it is a far cry from the defined pension plans that have dwindled over the past 40 years. Those traditionally provided steady, guaranteed income during retirement. These days, guaranteed income streams often come in the form of annuities, which are plans bought from insurance companies.

“Who wouldn’t feel more confident knowing they’ll receive a steady check every month for the rest of their life?” Joseph Patrick Roop, the president and CEO at Belmont Capital Advisors, told Newsweek. “The fact that 93 percent of survey participants want the option to convert part of their 401(k) into guaranteed monthly income says it all.”

The issue, according to Roop, is largely structural. While 401(k)s give employees freedom and flexibility, they were never designed to provide lifelong income.

“They give employees choices, but they also shift the burden of creating retirement income from the employer to the individual,” he said. “That’s precisely why employers love 401(k)s. They can contribute a match, but they’re off the hook for the long-term promises of a pension.”

The SECURE Act and SECURE 2.0 Act, the latter of which expands automatic enrollment in retirement plans, have helped to introduce guaranteed income options into some retirement plans. However, Roop said, “very few employers have adopted them,” and that broader flexibility is needed.

“Allow any plan participant to roll over some or all of their 401(k) into an annuity of their choice that provides lifetime income,” he continued, adding, “Just because an annuity is included in a company plan doesn’t mean it’s the right fit for every person in the company.”

Aaron Cirksena, the founder and CEO of MDRN Capital, agreed that the desire for guaranteed income is naturally rooted in worries about financial longevity. “Retirees aren’t just worried about having enough money. They’re worried about when that money will run out,” he told Newsweek. “A guaranteed paycheck in retirement mimics the comfort of a salary.”

This trend isn’t necessarily a rejection of the 401(k) model, but rather a realization that it has limits. “It’s less about a lack of faith and more about missing pieces,” Cirksena continued. “Most people don’t want to ditch their 401(k), but they’re realizing it’s not a complete solution.”

Christina Muller, a licensed workplace mental health expert, suggested that this craving for security goes beyond finances, and that people naturally “crave predictability and stability, and our brains need these for psychological safety.”

“The 401(k) system can feel like rolling the dice with your future, adding undue financial stress for some,” she told Newsweek. “People want structure and what feels like an ‘insurance plan’ for their hard-earned money and future.”

She added that Gen X, many of whom are nearing retirement after experiencing multiple economic downturns, are especially likely to prioritize safety and consistency in their planning. Almost 60 percent of Gen Z and millennials in the survey said they would be more likely to participate in their workplace retirement plan if guaranteed income options were included.

“Reducing the financial and mental load for later in life will help stave off this ‘invisible interest’ of stress and uncertainty that compounds over time,” she continued.

As inflation and market instability continue to cast doubt on traditional saving strategies, demand for stable, reliable income in retirement is likely to grow.

Cirksena said: “Even folks with solid savings are starting to think, ‘What if this doesn’t stretch as far as I thought?’ That fear is driving the push for income that’s stable, reliable, and protected from market swings.”