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Your 401(k) Has Probably Gotten Better

401(k)s are not perfect, but it is amazing how much they have improved.

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It is pretty easy to focus on what is wrong with our defined-contribution retirement system. Lots of employees still do not have access to workplace retirement plans. Fees can be too high, especially for workers at smaller firms. Sometimes employees face making complex decisions with relatively little guidance. Many of us do not save as much as we should for retirement. All of these things are true.

But there is a more positive side to the 401(k) story. Over the past few decades, 401(k)s have simply gotten a whole lot better. Insights from behavioral economics have led to the development of retirement plan features that have encouraged greater employee participation and higher deferral rates. The industry has developed investment options that simplify decision-making. 401(k) plan assets are much better diversified than they were in the past.

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Scott Cooley does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.