Retirement assets more important than ever

Employer-based retirement plans and individual retirement accounts continue to grow in importance as a source of retirement income for both public and private-sector retirees, according to new analysis by Craig Copeland of the Employee Benefit Research Institute.

In the public sector, defined benefit pensions continue to be the top type of retirement plan, although many are turning to defined contribution plans as well. In the private sector, DB plans have declined for many years, replaced by DC plans.

According to the Federal Reserve, there was $4.87 trillion in defined benefit plans in 2011. Defined contribution plans held $3.86 trillion and IRAs held $2.21 trillion.

According to Copeland’s analysis, the share of American families with a member in any employment-based retirement plan from a current employer increased steadily from 38.8 percent in 1992 to 40.6 percent in 2007, before declining to 37.9 percent in 2010.

Ownership of 401(k)-type plans among families who contributed to retirement savings more than doubled from 31.6 percent in 1992 to 79.5 percent in 2007. That figure increased to 82.1 percent in 2010.

Overall participation by families in a retirement plan declined from 2007-2010, but the percentage of family heads who were eligible to participate in a DC plan and chose to participate stayed about the same at 78.2 percent in 2010.

The number of families who owned an IRA or Keogh plan declined from 30.6 percent in 2007 to 28 percent in 2010 and the percentage of families with a retirement plan from a current employer, a previous employer’s DC plan, or an IRA/Keogh declined from 66.2 percent in 2007 to 63.8 percent in 2010.

He also found that rollover IRAs hold a larger amount of assets than regular IRAs, accounting for 43.2 percent of all IRA and Keogh assets. Traditional IRAs held 42.7 percent of the IRA assets and Roth IRAs accounted for 11.1 percent.

DC account balances accounted for 58.1 percent of families’ total financial assets in 2007 and that share grew to 61.4 percent in 2010. Defined contribution and/or IRA/Keogh balances increased their shares as well, from 64.1 percent of total family financial assets in 2007 to 65.7 percent in 2010.


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