By John Beshears, James J. Choi, David Laibson & Brigitte C. Madrian

Historically, retirees in the US relied on the “three-legged stool” of Social Security, defined benefit (DB) pension plans, and personal savings to provide retirement income.¹ Beginning in the late 1970s, however, access to DB plans began to fall while access to defined contribution (DC) plans, which require individuals to make their own savings plan contributions and investment decisions during their working years, rose.² As of December 2023, retirement assets in DC plans — e.g., 401(k)s — and individual retirement accounts (IRAs) totaled $24.1 trillion, with 56 percent of those assets held in IRAs. Nearly two-thirds of IRAs contained funds rolled over from 401(k)s or other employer-sponsored retirement plans. By comparison, DB plans held $11.8 trillion.³

While households now have more power to decide how much to save and how to invest it, many save little during their working years. About one-quarter of Americans aged 65 or older receive 90 percent or more of their household income from Social Security.⁴ We have spent the past 25 years investigating how plan design features influence individuals’ savings behavior, which is all the more important as DC plans now serve as a critical savings vehicle for retirement preparation.

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