EBRI finds that 401(k) plans are growing, but IRA ownership is falling

Analyzing the four-year period from 2007-2010, the Employee Benefit Research Institute (EBRI) found that participation in 401(k) plans continued to grow, while ownership of IRAs fell. The report is based on the most recent data from the Survey of Consumer Finances (SCF), the Federal Reserve Board’s triennial survey of wealth.

According to the EBRI, the share of American families with a member in any employment-based retirement plan from a current employer increased steadily from 38.8% in 1992 to 40.6% 2007, before declining in 2010 to 37.9%. Ownership of 401(k)-type plans among families participating in a retirement plan more than doubled from 31.6% in 1992 to 79.5% in 2007 and increased again in 2010 to 82.1%. However, the EBRI found that the percentage of families owning an IRA or Keogh plan declined from 30.6% in 2007 to 28% in 2010. In addition, the percentage of families with a retirement plan from a current employer, a previous employer’s defined contribution plan, or an IRA/Keogh declined from 66.2% in 2007 to 63.8% in 2010.

Retirement plan assets constitute majority of total wealth

The EBRI found that retirement plan assets account for a growing majority of most Americans’ financial wealth, outside the value of their home. Defined contribution plan balances accounted for 58.1% of families’ total financial assets in 2007 and that share grew to 61.4% in 2010. Defined contribution and/or IRA/Keogh balances increased their share as well, from 64.1% of total family financial assets in 2007 to 65.7% in 2010.

Wealth declined but participation remained steady

The EBRI report notes that the most recent data, along with other EBRI research, indicate that many people are unlikely to afford a comfortable retirement. “Americans lost a tremendous amount of wealth between 2007 and 2010, and the percentage of families that participated in an employment-based retirement plan and/or owned an IRA decreased as well,” said Craig Copeland, EBRI senior research associate and author of the report.

However, he added, the percentage of family heads who were eligible to participate in a defined contribution plan and actually did so remained virtually unchanged during this time. Therefore, despite all the bad news that resulted from this period, one positive factor should be noted: “Those eligible to participate in a retirement plan continued to participate—which may help change the likelihood of a lower retirement standard for many Americans,” Copeland said.

Rollover IRAs had more assets than regular IRAs

While regular IRAs account for the largest percentage of IRA ownership, rollover IRAs had a larger share of assets than regular IRAs in 2010, the EBRI report found. Specifically, among total IRA assets, rollover IRAs account for 44.5% of assets, regular IRAs 44.1%, and Roth IRAs 11.4%. Therefore, rollover IRAs account for a larger share of assets than regular IRAs, while the two together account for just under 90% of the IRA assets.

Source: EBRI press release #987, September 26, 2012.

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For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

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