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Then, many of those who do have such accounts do not have sufficient funds to cover their retirement. The 401(k) — named for the section of the Internal Revenue Code, enacted in 1978, that enabled the first iteration of such a plan two years later — has become a replacement for traditional company pension plans, which employers have largely abandoned, said Monique Morrissey, economist at the Economic Policy Institute. However, "401(k)s were just really accidental and have proven to be a disaster," she added. For evidence, look no further than the very slow recovery investors have seen through these accounts since the Great Recession hit in 2008.

Retirement savings rate falls

The percentage of families that had retirement savings grew throughout the 1990s. But peaks in 2001 and 2007 were followed by downturns. And today, that participation still has not fully recovered. In 2017, 58% of families had retirement savings, down from a peak of 62% in 2007. This shows that retirement accounts are more vulnerable to downturns compared to pensions, according to the Economic Policy Institute. That's because workers choose how much money they put in 401(k) accounts. And when a downturn hits, the temptation is to pull back on savings or withdraw money from those accounts.

Savings gap gets bigger

In 2016, the median-age working family had just $7,800 in retirement savings. At the same time, families in the 90th percentile for wealth had $320,000 put away. And for those in the top 1%, those balances climbed to $1.7 million or more. That disparity has grown since the Great Recession. That's because the smaller balances have stayed put, while the larger accounts have seen substantial growth. "The median net worth of households approaching retirement essentially fell by half in wake of the recession and has only slightly improved since then," Morrissey said.

Retirement savings fall short

Meanwhile, in 2016 the mean, or average, retirement savings for all families was $120,809. And the median for families who have access to retirement savings was $60,000. That's a big difference from the median retirement savings of $7,800, according to the Economic Policy Institute. (The "mean" refers to average savings, or total savings divided by number of savers — a number that can be highly skewed by a few very high balances — whereas "median" refers to the actual midpoint, with half of savers above and half below.) The gap shows that those with big balances are pushing the average up for all families, Morrissey noted. "For the typical non-college educated or Hispanic or African American household, this system is absolutely catastrophically broken for them," Morrissey said.

What needs to change

To combat those problems, the Economic Policy Institute supports replacing today's 401(k) plans with guaranteed retirement account plans. Those accounts would require both employers and employees to contribute 1.5% automatically on every dollar earned. Low-income workers would get a tax credit to avoid having money taken out of their paychecks that they can't afford.

More workers would have access to the savings plan, which would help cover what Social Security benefits don't. At the same time, Social Security benefits should also be expanded, Morrissey said. Top Democratic presidential candidates support that position. Plus, a Congressional proposal that also shares the same goal, the Social Security 2100 Act, has the backing of more than 200 House Democrats, Morrissey noted.

What you can do now

While consumers wait for broader changes, there are still some things you can do to improve your retirement prospects, Morrissey said. First, if you have retirement savings, make sure you are invested in low-cost investments such as index funds. While investors sometimes mistake high fees for better performance, that isn't necessarily the case. "Nobody should be paying a high fee for a managed fund," Morrissey said.