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Ownership of retirement accounts fell in 2013, but median and mean values of retirement accounts rose substantially, according to a Federal Reserve Bulletin.
Based on its Survey of Consumer Finances (SCF), the Federal
Reserve said ownership of retirement accounts—including individual retirement
accounts (IRAs), Keogh accounts, and employer-sponsored defined contribution
(DC) and defined benefit (DB) accounts—fell below 50% in 2013, continuing the
downward trend also observed between the 2007 and 2010 surveys. The conditional
median value of retirement accounts rose 25%, from $47,200 in 2010, to $59,000
in 2013, and the mean value rose 10%, from $183,400 in 2010 to $201,300 in
2013. The Federal Reserve attributes this growth to a combination of resurgent
stock markets and increased contributions by retirement plan participants.
Among families whose head is between ages 35 and 64, those
in the bottom half of the usual income distribution saw overall declines in
retirement plan participation between 2007 and 2010 and then again between 2010
and 2013, from 48.2% in 2007 to 40.2% in 2013 This overall drop was driven by
declines in both IRA and DC coverage, as there was little change in the
fraction of families with a DB plan. Those families in the next 40% of the
income distribution saw only a slight net fall in overall retirement plan
participation between 2007 and 2013, since between 2010 and 2013, they
experienced a slight increase in participation driven by increases in
participation for all three classes of retirement assets. Families in the top
10% of the income distribution saw a slight increase in retirement plan
participation from 2007 to 2013, reaching 94.6% in 2013.
The Federal Reserve notes the value of assets held within
IRAs and DC plans are among the most significant components of many families’
balance sheets and are a significant determinant of their future retirement
security. The average combined IRA and DC pension balance for families owning
those assets in the lowest income group was $39,100 in 2013. That figure is
close to the 2010 average balance of $40,500, but down more than 20% from the
2007 value of $50,600. Those in the upper-middle income group saw an increase
in their average total balance between 2007 and 2010. While there was little
change in average balance from 2007 to 2010, between 2010 and 2013, the average
balance for this group increased by approximately $20,000, or 16%, from
$126,900 to $147,300. Average balances fell for those in the top income group,
and particularly for those at the very top. For example, the fraction of
families in the top 10% of the income distribution with retirement account
balances exceeding $1,000,000 fell from 14% in 2010 to 9% in 2013.
The SCF also indicates friends, relatives and associates
remain the most common sources of information used to make investing decisions for
consumers in 2013 (40.8%). This is followed by sellers of financial services
(38.3%); the Internet (35.3%); and lawyers, accountants and other financial
advisers (31.8%). Fewer families reported consulting print media or material in
the mail in 2013 than in 2010.