401(k) ownership up, IRA ownership drops

American families' involvement in retirement plans are on the decrease, and their ownership of IRAs is also on a downward slope, after strong increases in the last two decades.

But if there's any good news in there for the 401(k) industry, EBRI research suggests that those dwindling participants are more likely to be participating in a 401(k) than any other retirement product. And, along the way, the 401(k) has become a much more important repository of future wealth than any other financial vehicle.

Data from the Federal Reserve Board's Survey of Consumer Finances indicates that the percentage of American families with at least one member involved in an employment-based retirement plan of any kind increased considerably, at first, from 38.8 percent in 1992 to 40.6 percent in 2007. But the figure dropped in 2010, to a low of 37.9 percent.

At the same time, ownership of 401(k) plans has become much more prominent among those who still do have employment-based options available. What started as a meager 31.6 percent back in 1992 jumped to 79.5 percent in 2007 and further increased to 82.1 percent in 2010.

But the big losers were IRA or Keogh retirement plans for the self-employed, whose numbers dropped from 30.6 percent in 2007 to 28 percent in 2010. And families holding retirement plans from a current employer or a previous employer's DC plan or an IRA/Keogh dropped approximately three percent from 2007 to 2010.

"Americans lost a tremendous amount of wealth between 2007 and 2010," says Craig Copeland, EBRI senior research associate. But "those eligible to participate in a retirement plan continued to participate - which may change the likelihood of a lower retirement standard for many Americans."

Copeland says that despite the shrinking market, with unemployment, layoffs and decreases in employee benefits programs all part of the recent and ongoing economic downturn, employment-based retirement programs are a growing cornerstone of most families' future financial planning needs.

Defined contribution plan balances accounted for 58.1 percent of families' total financial assets in 2007, a figure that grew to 61.4 percent in 2010. And defined contribution and/or IRA and Keogh balances were also up slightly in that period, rising form 64.1 percent fo total family financial assets in 2007 to 65.7 percent in 2010. 

Among IRA assets, the research suggests that rollover IRAs account for 44.5 percent of assets, regular IRAs make up 44.1 percent and Roth IRAs comprise 11.4 percent. 


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