The Employee Benefit Research Institute, or EBRI, a nonprofit research firm, studied the question and concluded that the answer is yes -- as long as Social Security benefits aren't cut and a worker contributes to his 401(k) for at least 30 years.
Given those circumstances, EBRI concluded:
- Between 83 percent and 86 percent of workers will be able to replace 60 percent of their age-64 income on an inflation-adjusted basis.
- Between 73 percent and 76 percent will be able to replace 70 percent.
- Some 67 percent of lower-income workers will be able to replace 80 percent of their income.
EBRI says that, thanks to the Pension Protection Act of 2006, which encourages employers to automatically enroll workers in 401(k) plans, more workers will likely have enough savings to retire comfortably. When there is auto enrollment with a 1 percent increase annually, between 88 percent and 94 percent are projected to be able to replace 60 percent of their pre-retirement income. Between 81 percent and 90 percent will be able to replace 70 percent, and 73 percent to 85 percent of savers will be able to replace 80 percent.
All of this seems encouraging, until you factor in the possibility that Social Security won't be able to meet all its obligations. Social Security Trustees projected in 2013 that the Social Security trust fund reserves will be depleted in 2033. After that, payroll tax income alone will be sufficient to pay three-quarters of scheduled benefits through 2087.
Jack VanDerhei, EBRI research director and author of the analysis, concludes that if Social Security isn't put on a solid financial footing within the next few years and Social Security benefits do drop by 24 percent, the number of people who will be able to retire with 80 percent of their age-64 income falls precipitously, to about half for both lower-income and higher-income workers. Higher income workers receive proportionately less Social Security, so they replace a greater percentage of their income with savings.
VanDerhei says EBRI isn't taking a position on whether these results are good or bad. It all depends on how you look at the issue. "In terms of overall population, our simulation suggests there is going to be a crisis, but it isn't going to involve people who work for employers with retirement plans. It is going to affect people who haven't had long-term relationships with employers."