The country may be turning 250 this summer, but many Americans didn’t start taking retirement savings seriously until it turned 200.
Before that, pensions and Social Security were the primary means of support in old age, but as both declined or faced financial strain, new mechanisms emerged. From the mid-1970s through today, a lot has changed in how Americans save for retirement. For good reasons: We are living longer, and retirements are stretching on for decades.
As we commemorate America’s 250th or semiquincentennial birthday, here’s a look at how saving for retirement has evolved over the years.
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1960s-mid-1970s: Pensions are all the rage
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During the 1960s, many workers stayed with one company for their entire career and, in return, received a paycheck for life once they retired. These pensions were common throughout the 1960s and early 1970s —particularly in public sector jobs and heavily unionized industries like manufacturing, automotive, and steel — and served as the primary way Americans supported themselves in retirement.
They were supplemented by Social Security payments and personal savings, which people typically put into bank savings accounts and U.S. savings bonds. Life expectancy was also around 70 in the 1960s, which meant individuals needed to save less. Plus, the cost of goods and healthcare was a lot lower than it is today.
1975-1980: Tax-deferred saving is born
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By the mid-1970s, traditional pensions were on shaky ground, and Americans realized Social Security wasn’t enough to live on in retirement. While some employees had access to profit-sharing or money purchase pension plans, many didn’t — and employers were scaling back those offerings. Concerned that workers weren’t saving enough, Congress stepped in and passed the Employee Retirement Income Security Act (ERISA) in 1974. In January 1975, the first IRA was introduced.
Initially, any individual without access to a company pension plan could contribute up to 15% of their salary, or $1,500 per year, to their IRA. They could take a deduction on their tax return, and their contribution would grow tax-deferred. If anyone withdrew the money before 59-½, they would have to pay a 10% penalty. This was designed to encourage savers to keep the money in their IRA until they reached retirement age.
Three years after the IRA was introduced came yet another way to help workers save for retirement, the 401(k). It was first introduced as a provision in the Revenue Act of 1978, allowing employees to choose to receive a portion of their income as deferred compensation, and created tax structures around it.
In 1980, Ted Benna, who is known as the “Father of the 401(k),” encouraged his consulting firm to create the first 401(k) plan for employees, and it took off from there. Over the decades, there have been changes and upgrades made to the 401(k).
Early 1990s: Set-it-and-forget-it with Target Date Funds (TDFs)
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Designed as a set-it-and-forget-it type option for 401(k) participants, the first target-date funds, called LifePath, were introduced by Wells Fargo and Barclays Global Investors in March 1994. Built around a specific retirement year, these funds automatically shift toward more conservative holdings as the saver ages to protect their principal. Once the target date is hit, the portfolio permanently settles into a low-risk income allocation.
The structure has proven incredibly popular. According to Morningstar, TDF assets in the U.S. alone surged to $4.8 trillion by the end of 2025.
1989–2001: The Roth debuts
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Aiming to generate immediate federal revenue while also giving everyday Americans a way to avoid future investment taxes, Senators Bob Packwood and William Roth first proposed the ‘IRA Plus’ plan in 1989. It allowed for after-tax contributions to an IRA that would grow entirely tax-free.
It wasn’t until eight years later that the plan was codified as the Roth IRA under the Taxpayer Relief Act of 1997 and made available to the public in 1998.
While initial contributions were modest, the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 substantially raised those caps, introduced catch-up contributions for savers 50 and older, and paved the way for future inflation indexing.
2006: Auto-enrollment thanks to the Pension Protection Act
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Offering 401(k) plans is one thing, but getting workers to take advantage of them is another. Facing low adoption rates among employees in America, Congress tried to change that at the start of the 21st century by introducing auto-enrollment of 401(k)s.
A key provision of the Pension Protection Act of 2006, auto-enrollment allowed employers to automatically enroll new eligible employees into the company’s 401(k) plan at a default contribution rate of typically 3% of their salary, unless the employee opted out.
The idea was that employees wouldn’t notice a 3% deduction from their paychecks and were unlikely to opt out of their plan. As a result, auto-enrollment would force employees to save for their retirement.
Since then, 401(k) participation rates for companies utilizing this feature have jumped from roughly 44% to 86%, according to T. Rowe Price.
2010s: The DIY era
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Driven by the smartphone boom and financial technology, or fintech, the 2010s democratized how everyday Americans saved for the future. For the hands-on investor, mobile trading apps made it fast, cheap and easy to build a self-directed retirement portfolio of stocks and ETFs without a financial adviser.
The decade also saw the rise of the robo-advisor. These platforms used automated algorithms to manage and rebalance a user’s portfolio for a fraction of the cost of a human adviser. Spurred by a deep mistrust of traditional financial institutions following the 2008 Great Recession, and appealing to a younger generation with low minimum account requirements, robo-advisors proved that you didn’t need a massive net worth to access sophisticated wealth management.
2020s: Step up savings with the Secure Act and Secure 2.0
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Despite decades of efforts to get people to save for retirement, by the end of the 2010s, it was apparent that millions of Americans were still falling behind on retirement readiness, with many lacking access to a workplace retirement savings plan. People were also living longer and working later in life. To help workers shore up their retirement savings and account for the current lifespan and lifestyle of Americans, Congress passed the Secure Act and later the Secure 2.0, which addressed those retirement issues and more.
Both acts ushered in many changes to retirement savings, including:
-Pushed back Required Minimum Distributions (RMDs) from 72 to 73, with the age to reach 75 by 2033.
-Expanded catch-up limits for older workers between the ages of 60 and 63.
-Allowed employers to legally make matching contributions into a worker’s 401(k) based on the employee’s student loan payments, even if the worker can’t afford to contribute their own salary.
-Allowed long-term, part-time employees to participate in workplace retirement plans after two years instead of three years.
-Allowed savers to withdraw up to $1,000 once per year out of their retirement accounts for an urgent personal financial emergency without triggering the traditional 10% early withdrawal tax penalty.
-Made Roth accounts within employer-sponsored workplace plans exempt from mandatory lifetime withdrawal rules.
More to come
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A lot has happened to the American retirement landscape over the past few decades, and even more changes are on the horizon. Moving forward, the next era of retirement savings will likely be influenced by AI, mobile algorithms and digital assets like cryptocurrency.
As the nation steps into its next chapter, one thing remains certain: the tools we use to build our nest eggs will continue to evolve, promising many more decades of change to come.
