Graduation Year

2017

Date of Submission

4-2017

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics-Accounting

Reader 1

Matthew Magilke

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Terms of Use for work posted in Scholarship@Claremont.

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© 2017 Ramon Gomez

Abstract

Over the past three decades, employer-sponsored 401(k) plans have grown in popularity as they have proved to be a valuable benefit employers can provide to employees and tax-deductible expense that employers can easily account for on their books. However, a major concern around these plans is that they have come to take the place of traditional pension plans offered by employers, forcing employees to assume full responsibility for their retirement savings. This paper evaluates the overall effectiveness of 401(k)s at the top 50 companies in the Fortune 100, examining participation rates, account balances, and employer contributions. It concludes that employees that have 401(k)s at these 50 companies fare much better than the average American with regard to retirement savings. Nonetheless, the substitution of traditional pensions with 401(k) plans by companies in the United States is problematic. Employees, which previously could rely on a company pension in retirement, are unintentionally delaying retirement due to a lack of savings. Furthermore, a growing number of workers without retirement savings will certainly put a strain on Social Security funds in the coming decades.

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