Ownership in 401(k) Plans Continues to Grow


Fewer American families are participating in a retirement plan at work, but more of those with a plan are in a 401(k), a report found.




According to a report by the Employee Benefit Research Institute (EBRI), at the same time 401(k) plan ownership is rising, ownership of individual retirement accounts (IRAs) is sliding.

In an analysis of the period 2007-10, EBRI found that 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 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 counting the value of their home. The median percentage of families’ total financial assets comprised 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:




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. Across all demographic groups, these assets account for a very large share of total financial assets for those who own these accounts.

However, the EBRI report notes that the most recent data, along with other EBRI research, indicates that few people are likely 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 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, Copeland said. “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,” he said.

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. The full report is published in the September EBRI Issue Brief, “Individual Account Retirement Plans: An Analysis of the 2010 Survey of Consumer Finances,” available online at www.ebri.org.