18 April 2024

Ownership In 401(k) Plans Grows

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ACCORDING TO a report by the Employee Benefit Research Institute (EBRI), while 401(k) plan ownership is rising, ownership of individual retirement accounts (IRAs) is sliding.  

In an analysis of the period from 1992 to 2010, EBRI found the share of American families with a member in any employment-based retirement plan from a current employer increased steadily, from 39% in 1992 to 41% in 2007, before declining to 38% in 2010.

Ownership of 401(k)-type plans among families participating in a retirement plan more than doubled-from 32% in 1992 to 79.5% in 2007-and increased again in 2010 to 82%. But the percentage of families owning an individual retirement account (IRA) or Keogh retirement plan (for the self-employed) declined, from 31% 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 (DC) plan or an IRA/Keogh declined, from 66% in 2007 to 64% in 2010.

As in the past, EBRI found that retirement plan assets account for a growing percentage of most Americans' financial wealth, not including the value of their home. The median percentage of families' total financial assets contributed by DC plan assets and/or IRA/Keogh assets (assuming the family had any) increased from 2007 to 2010 and accounted for a clear majority of these assets.

In fact, DC plan balances accounted for 58% of families' total financial assets in 2007, and that share grew to 61% in 2010. DC and/or IRA/Keogh balances increased their share as well, from 64% of total family financial assets in 2007 to 66% in 2010.

However, EBRI said, the most recent data, along with other EBRI research, indicate that few people are likely to be able 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 eligible to participate in a DC plan and who actually did so remained virtually unchanged during this time. Therefore, Copeland said, 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.” - Jill Cornfield 

To read the original article click here.  

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