Anne Tergesen’s recent Wall Street Journal piece, The 401(k) Has Reached a Tipping Point in Its Takeover of American Retirement, paints an optimistic picture of a retirement system finally hitting its stride. After nearly five decades, half of private-sector workers are now saving in 401(k) plans—a milestone that signals the defined contribution model has firmly supplanted the traditional pension as America’s retirement backbone.
With participation surging, thanks to automatic enrollment, state mandates, and small-business incentives, it’s tempting to call this a triumph of policy and market ingenuity. But beneath the rosy statistics lies a nagging question: Is this tipping point a victory lap or does it leave more to be desired?
Tergesen’s data is compelling. Access to 401(k)-style plans has climbed to 70% of private-sector workers, up from 60% a decade ago, with participation rates ticking higher as companies embrace auto-enrollment. Vanguard data cited in her article shows that 94% of eligible workers stick with these plans once auto-enrolled—a stark contrast to the 67% who opt in voluntarily.
Add in federal tax credits and new laws extending eligibility to part-timers, and on the surface, you’ve got a system firing on all cylinders. By 2029, Cerulli Associates predicts 1.1 million 401(k) plans, a 44% jump from 2023, as outlined in the Wall Street Journal.
Yet, for all this progress, the cracks in the 401(k) edifice remain glaring. Boston College’s Center for Retirement Research estimates that 40% of workers still aren’t saving enough to sustain their lifestyles in retirement, Tergesen notes. That’s a sobering counterpoint to the celebration of broader access.
A 2024 report from the Employee Benefit Research Institute underscores this gap, finding that median 401(k) balances for workers in their 60s hovered around $157,000—far short of the $1 million many advisors say is generally needed for a comfortable retirement.
The shift from pensions—where employers bore the investment risk—to 401(k)s, where workers shoulder it, has always been a double-edged sword. Automatic enrollment at 3% or even 5% of pay, while a behavioral nudge in the right direction, often falls below the 10-15% savings rate popularly recommend.
The policy pile-on Tergesen describes—state mandates, federal incentives, and upcoming matching contributions for lower-income savers in 2027—shows Washington and state capitals are waking up to the retirement crisis. Seventeen states now require employers without plans to offer state-run savings options, and early adopters like California and Oregon are seeing 401(k) adoption outpace the national average. Still, state-run IRAs, capped at $7,000 annually versus the $23,500 limit for 401(k)s, feel like a consolation prize for workers at firms unwilling or unable to step up.
The real game-changer might be the cultural shift underway. Employers are starting to see retirement benefits as a retention tool, not just a cost center. This aligns with a broader trend: in a post-pandemic world where workers demand flexibility and security, benefits matter more than ever. Small businesses, which employ nearly half of America’s workforce, are finally joining the party, spurred by tax credits and providers slashing fees.
But the 401(k)’s dominance doesn’t erase its flaws. Fees may be dropping, but they’re not zero, and for lower-income workers, even modest costs can erode returns over decades. Investment options can overwhelm the average saver, and market downturns—like the ones we’ve weathered in recent years—can devastate balances without the backstop pensions once provided. The part-time worker inclusion is a win, but many gig and freelance workers remain on the sidelines, a gap neither Congress nor states have fully addressed.
Tergesen’s article heralds a tipping point, and she’s right—the 401(k) has cemented its place in American retirement. But reaching half the private-sector workforce isn’t the finish line; it’s a checkpoint. Policymakers and employers must keep pushing—higher default savings rates, broader matches, and solutions for the gig economy—to ensure this takeover doesn’t leave millions stranded in old age. The system’s working better than ever, but “better” isn’t the same as “good enough.”
Securities offered through Kestra Investment Services, LLC, (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC, (Kestra AS) an affiliate of Kestra IS. Beacon Financial Services is not affiliated with Kestra IS or Kestra AS. Beacon Financial Services does not provide legal or tax advice. https://www.kestrafinancial.com/disclosures
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