Individual account (IA) retirement plans are the dominant source of financial assets for many private-sector workers and retirees, and are gaining importance among those currently or previously employed in the public sector. These plans include employment-based retirement savings plans financed by employer and employee contributions, Keogh plans for the self-employed, and individual retirement accounts for savings outside of the workplace. Using the Federal Reserve's Survey of Consumer Finances, this week’s Fast Fact examines the ownership of and amount held in IA retirement plans by families with heads of different races and ethnicities.
Figure 1 Figure 2 Percentage of Families Who Have an Individual Account Retirement Plan, ass compan et share w ies mas 76 ust be aware .6 percent of fo factors r families with impacting Black participatio familyn hin DC pl eads. Similarly, ans other t IA asset han jus ma st inco de up me and 79.2 p help erce members nt of Participation Rates in Employment-Based DC Plans Percentage of Working Family Heads Eligible for a Defined Contribution Plan, by Race of Family Head of In total fin 2 th 022, ese com ancial asse the median munities b ts fo IA ret r families with etter b ireme alance the nt plan Bir p balan lack h rio ce of rities and eads w those h ho cul earned avin tural ex g abo a pl pectatio ve t an was o he median ns ver to in twice as in crea come, m se parti higuch h cipatio fo h r families igher than th n and twith he e by Race of Family Head 70% 11 2007 2010 2016 2019 2022 me am Whou di ite, n an f nt saved on inancial ass -Hispan in these ic h et shar p eads lanes for s. as th Th e me all fami is can b dian lies earnin e an i balan mpo ces fo rtant g abo r families step i ve the median n wit redu h cing Black o in th come e wea r Hisp — lth anic h 63 g.6 ap amon perce eads (Fig nt g . Despi race urs, e e 5) te fa speci . These milies ally Among the working family heads eligible for an employment-based DC plan, the participation rates differ by the Diversity, Equity, and Inclusion Council 2007 2010 2016 2019 2022 68 2.2% fig with gi ven ur Black es chang the larg family e sign e share o heads ificantl f fin hav y ancial as when ing much sp sets r litting low epresented er m the grou edian ps by IA p in IA p to lan tho lan balan se with asset ces s. th incomes an tho abo se with ve vWh s. at o ite, non r belo -Hispan w the med ic family ian race/ethnicity of the family head (F6ig 0.4ur % e 4). White, non-Hispanic and “other” family heads have much higher 70% August 22, 2024, #511 60% 58.2% 57.8% 57.2% in heads, come. Unsu these brp alances risingl ma y, the ke u bp alances a high er prop were lo or wer for tion of t families heir total fin with in ancial ass comes bets. elow t he median ($29,000) and participation rates than their Black and Hispanic counterparts. Black and Hispanic family heads participate at rates 54.3% 62.3% 61.9% 52.6% 52.7% hi Abo ghut er fo EBRI r those with : The Emplo incomes yee Benefit R above thee median search In ($ stitu 162, te is a p 500). W riv ithin th ate, nonparti ese incsan, ome g and ro n up onpr s, the di ofit resear sparities i ch insti n tu5te 9.9% of 69.9 perce 5nt 2.1 and % 72.4 percent, respec 59 tiv .6%ely, compared with White, non-Hispanic heads’ participation rate of 59.4% 51.5% 50.5% 50.6% 60% 50.1% 57.8% 57.3%57.3% 56.9% 9 48.0% 50% me Regardi based di 5an I 5.2 in %ng A p W families e aslan hing balan 54ton, .9% arnin ces D.C. ag mon , t in hat comes g fo fam cuses on at o ilies with r b h elow t ealth, heads o he m savf d in edian gs, ifferent retiremen , the sh race ares s/ethn t, o and f fin econ icitie ancial ass s are still ap omic se ets w curite paren y re similar for issues. EBRI 55.1% t. all does 83.3 percent. 54 .7 % 54.3%54.2% 53.5% fam not lobb ilies exce y and do pt fo es no r those with t take pol Wh icy ite, non position -Hispan s. The work ic heads. F of EBRI urtherm is made p ore, thossib e group with le by fundin incomes g fro at o m its me r below t mbers he 50.1% 48.7% 48.2%48.3% 41.7% Individual Account Retirement Plan Trends by 50% 46.0% and Notab me di sp an h ly on , f sors, ad mu amilies with wh ch l ich ess in v Wh clude a bro ariatio ite, n n on am ad r -Hispan onang g the race of e of ic h p eads h ublic and fa ad t mily he h pheads rivate o ighest thran t gan medi he ab ization an bov alance in s. F e–me or more i dian i both nco nf inco orm me me g ation ro gup ro , v up , stay isit s. Among ing Figure 4 40% 36.8% 34.9% www th with e abo in .ebr a 5 vei.o – .1 me r g pe .di rcentage p an income oi families, th nt range coose mpared wit with Black h the heads 21.2 had percen the lo tage p wes oi t median nt difference amo IA balance at ng th $ ose with 80,000, Working Family Heads’ Participation Rate* in an 3 Em 3.6%ployment-Based Define 39.d 6%Contribution Plan in Race/Ethnicity of Family 34.0% Heads 32.7% 38.6% 40% 37.1% fo in comes llowing at o the t r brend elow t fro he median m families a . cross incomes. However, among fam3 ilies e 0.5% arning incomes at or below the 29.7% 29.5% 2022, by Race of Family Head 30% 27.8% 31.8% me dian, those with Hispanic heads had the lowest median balance of $10,000 compared with $39,540 for families 25.5% Individual account (IA) retirement plans are the dominant source of financial assets for many private-sector 30% All White, Non-Hispanic Black/African American Hispanic Other with White, non-Hispanic heads. Even within their respective income groups, families with Black and Hispanic This report was written by Claire Conway, EBRI Research Intern, with assistance from the Institute’s workers and retirees, and they are gaining importance among those currently or previously employed in the public 100% 20% heads had much lower median IA retirement plan balances than families with White, non-Hispanic heads. research and editorial staffs. Any views expressed in this report are those of the author and should not be sector. These plans include employment-based retirement savings plans financed by employer and employee 90.7% 20% 89.3% 89.1% 88.9% 88.6% ascribed to the officers, trustees, or other sponsors of EBRI, Employee Benefit Research Institute-Education Figure 6 90% contributions (most notably, defined contribution (DC) plans such as 401(k) plans), Keogh plans for the self- 83.3% 82.5% and Research Fund (EBRI-ERF), or their staffs. Neither EBRI nor EBRI-ERF lobbies or takes positions on 10% Media 80 n .9% Share of Total Financial Assets Represented by Individual Account (IA) Retirement Plan employed, and individual retirement accounts (IRAs) for savings outside of the workplace (as well as, in certain 80% 10% specific policy proposals. EBRI invites comment on this research. Assets (of Those Having IA Plan Assets) in 2022, by Race of Family Head 73.2% cases, part of an employment-based plan). 72.4% Figure 5 69.9% 69.9% 68.6% 70% 0% Median Individual Account Retirement Plan Balances of Those Having a Plan in 2022, 0% All White Al , lNon-H W isp hita en , iN con-Hispanic BlaBl ck/ aAf ck/ riAf ca rin ca Am n Am eric ea rin can Hispanic HO isp tha en r ic Other This Fast Fact examines the ownership of and amount held in IA plans by families with heads of different races All White, Non-Hispanic Black/African American Hispanic Other by Race of 5Fa 7.7% mily Head 60% 10 0% 1 54.2% and ethnicities. This builds on prior EBRI research on IA plan ownership by race and ethnicity, including Source: EBRI estimates of the 2007, 2010, 2016, 2019, and 2022 Survey of Consumer Finances. Source: EBRI estimates of the 2007, 2010, 2016, 2019, and 2022 Survey of Consumer Finances. 2 All White, Non-Hispanic Black/African American Hispanic Other 50% comparisons by income. This study uses the Federal Reserve’s Survey of Consumer Finances (SCF) and uses the 90% 3, 4 race and ethnicity categories available in the public-use data from this survey. Percentage Eligible for a Defined Contribution Plan 79.2% 40% 80% 76.6% $200,000 $200,000 70.9% 70.0% 69.3% 67.8% 30% To Per hcent ave an age IA p Wit lan h an Individual through employme Account Reti nt (e.g., a DC p rem lan), ent Pl an indi an vidual must both work for an emplo6yer 7.3%that 70% 66.9% 65.8% 65.0% 64.4% 63.6% 63.6% 62.4% offers a plan and meet the eligibility requirements of the plan to participate in it. The relative percentages of Figure 3 $162,500 58.0% 20% 60% work In 2022, ing t fam he lily ikeliho heads elig od of f ib am le to ilies particip with Wh ate in ite, n a DC p on-Hispan lan are clearly ic heads h a factor aving anin IA p the dif lan ferences was near in ly IA p and more t lan han Percentage of Working Family Heads Eligible for a Defined Contribution Plan, $150,000 do own ub ership le that (F of fam igure 2) ilies . Iwith n 202 Black 2, 39.6 and per Hisp cent o anic h f Hisp eads anic wo — 62 rk .2in perce g fam nt ily v h s. 34. eads 0 were percent elig and ible 2fo 9.5 p r a DC p ercent lan, , and $138,500 10% 50% by Race of Family Head 48.7 percent of Black/African American working family heads were eligible. This compares with 62.2 percent of respectively (Figure 1). The families with “other” heads had retirement plan ownership rates more in line with the 0% All White, Non-Hispanic Black/African American Hispanic Other 40% fam White, n ilies with on-H Wh ispan ite, n ic wor on-ki Hng ispan family ic heads heads but and still 5 9.9 perce below them nt o . T f “o hes the di er” work sparities h ing fam ave b ilyeen con heads who sistent sin were eli ce gi 20 bl 07. e. Total Below Median Income Above Median Income 80% 5 $100,000 These disparities have held since 2007. $97,000 $100,000 30% 71.9% Source: EBR $I8 e 7 st ,0 im 00 at es of the 2022 Survey of Consumer Finances. 70.9% 70.2% While the overall percentage of families who had an IA retirement plan saw an increase from 50.5 percent in 2019 $80,000 70% *Participation rate is the percent participating among those eligible for a defined contribution plan. 65.8% 65.5% 20% The percentage of working family heads eligible for a defined contribution plan increased overall from 2019 to to 54.3 percent in 2022, families with either Black or “other” heads saw a decrease in the percentage with an IA 62.3% $60,000 2022, specifically for families with 59.9 Wh % ite, Black, and Hispanic heads. The percentage of working White, non- plan. Despite the decreases in 2022 among families with Black and “other” heads, the percentages in 2022 still 57.8% 60% 10% $45,000 $Hispan 50,000 ic family heads eligible for a DC plan consistently increased from 2007 to 2022. The percentage of Black surpassed those in 2010 and 2 $39,000 016. Families with bot $h Whi 39,540 te and Hispanic heads experienced increases in 51.5% Family heads with above-median incomes had much higher participation rates than those with incomes at or and Hispanic family4 h 8.7eads % eligible for a DC p $lan 29,00in 0 creased from 2019 to 2022, but these percentages are still 0% 47.7% 50% ownership in 2022, with families with White heads reaching their peak level in that year. 45.8% below the median — T89 otal.3 percent vs. 68.6 percent. Furthermore, Below Median Income among the family heads with Above in Medcomes ian Incom abo e ve the $16,800 $17,000 much lower than the 2007 figures for both groups. In contrast, “other” heads saw a decrease in eligibility in 2022, 41.8% $10,000 39.6% median, there was little variation in participation rates across races. These rates vary between 88.6 percent of 40% but the percentage of these family heads eligible was higher than in the years 2007–2016. Source: EBRI estimates of the 2022 Survey of Consumer Finances. $0 Black family heads and 90.7 percent of “other” family heads, a range of less than 3 percentage points. However, 1 Total Below Median Income Above Median Income See Copeland, Craig, “The Status of American Families' Accumulations in Individual Account Retirement Plans,” EBRI 30% among those with incomes at or below the median income, partici 27.patio 5% n rates differ by race/ethnicity of the To better understand the differences in DC plan eligibility by race/ethnicity, the role of income was accounted for Issue Brief, no. 610 (Employee Benefit Research Institute, June 20, 2024) for more detail on overall ownership and amount Source: EBRI estimates of the 2022 Survey of Consumer Finances. family head, from 54.2 percent of Hispanic heads to 73.2 percent of White, non-Hispanic heads. Notably, this by splitting the working family heads into two groups: those above and those at or below the median income of held in IA plans. 6 20% variation follows the same trends as the participation rates by race/ethnicity among all income groups. The families with a working head (Figure 3). In 2022, the eligibility rate for family heads with above-median incomes 2 For example, see Copeland, Craig, “The Status of American Families' Accumulations in Individual Account Retirement differences between the group with above-median incomes and the group with incomes at or below the median was much higher than for heads with incomes at or below the median. Additionally, the percentage of working Plans and Differences by Race/Ethnicity: An Analysis of the 2019 Survey of Consumer Finances,” EBRI Issue Brief, no. 527 10% sho Conclusion w the impact o f the intersection of race and income in DC plan participation rates in both overall participation family heads eligible for a DC plan varied significantly between races for those earning at or below median (Employee Benefit Research Institute, March 11, 2021) for a prior look at IA plan ownership by race and ethnicity. Median Share of rates and level of variance am Total Financi ong race al s. Assets Represented by IA Plan Assets income — 51.5 percent of White, non-Hispanic family heads compared with 27.5 percent of Hispanic family 0% 3 See Aladangady, Aditya, Jesse Bricker, Andrew C. Chang, Sarena Goodman, Jacob Krimmel, Kevin B. Moore, Sarah Reber, Participation in, eligibility for, and the amount held in IA retirement plans varied significantly among families Total Below Median Income Above Median Income heads. However, the above–median income group has very little variation, with the highest eligibility rate at 71.9 Alice Henriques Volz, and Richard A. Windle (2023). Changes in U.S. Family Finances from 2019 to 2022: Eviden 7 ce from with As IA retir family emen heads t pof lans g different ain prevalence a races and ethn monicities. Th g private-ese and d p ispariti ublic-es a secto mon r emplo g race yees, o s/ethnne way icities are app to meaarent sure th even eir Median I percent for “o A R theti er” fam reme ily nt heads Plan Balances and the lowes t eligibility rate at 65.5 percent for Black family heads. Source: EBRI estimates of the 2022 Survey of Consumer Finances. the Survey of Consumer Finances. Washington: Board of Governors of the Federal Reserve System, October, https:// when importance a splitting th mone fam g different ilies by demog income. raphics is fin However,di dng ifference the share o s in DC p f financial ass lan eligibility ets held andin parti these p cipatio lans. n rates are The medi an doi.org/10.17016/8799 for more information about the SCF. much share o less no f total fin ticeable in ancial ass gro ets repr ups with ese in ntco edme by s IA retireme above the median. nt plan As assets amon a result, p g lan those h sponso avin rs and g these a financial serv ssets was abo ice ve 8 5 The participation rate is the percentage participating among those eligible for a DC plan. The difference in eligibility between Black and White family heads was less than 1 percentage point in 2007, but the 4 10 60 The perce racint al/e for all families thnicity categoriwith es fro wo m SCF rkin ar g fam e self ily -iden heads tifie (F d aig nd inclu ure 6)de . Wh By it race e, non /ethn -Hisp icity anic; B , the h lack/Africa ighest me n di Ameri an IA p can; lan eligibility rate for Black family heads dropped in 2010, leading to a 7 percentage point difference. This disparity grew each 9 To further investigate this finding, a probit model holding income, age, net worth, tenure, and company size constant was Hispanic; and other, which consists of those races/ethnicities not defined in the three prior categories, such as Asian managed assets (trusts, annuities, and managed investment accounts), and other financial assets (loans, future proceeds, subsequent year, with 2022 seeing a disparity of nearly 14 percentage points. 11 run dif See C fe al re ong wit nt r opaces elah t nd, and eth he Craig a race/e nicit nd Lisa thie nicit s more c y G of t reen he om wald fa m mil only , “ y head 2021 Ret have, T . Also, s his a iremen na ee lysis s t C Co onfide pelan hows d, nce Sur C tha raig, an t a famil vey: d K A y wit Cl yle os h Be ea r du, “Ret L hea ook d who i at Bl irement Pla ac s Bl k a ack nd H or H n ispa isnic panic 6 Americans and those who identify as multiracial. SCF is at the family level, so the characteristics of the family head (or the royalt The me ies, dian non-apublic st djusted inc ock). om e in 2022 was $86,472. Ame was Partic le ricans,” ipati ss lion a kely t End the C BRI Iss o partic ue urre ipant i Brie nt fPopu n , no. 53 an em lati0 (Em ploy on Sm ur pl ent vey oy -based de : ee Be The nef Trefin it nd Re ed From search con the Ret trib Insti ution plan tute, J irement une (w Acc hen off 10, 2 ount 021) fo ered) tha Questi r m ons,” n fami ore exp EBRI Iss lila es w natio it ue h n a Brie aW bout t hite, f, no. he 7 ref 10 erence person) are used to categorize the families. In 2022, 66.2 percent of the families had family heads who were White, More Financial resea asse rch i ts i s n nclu eces de sarce y rtific to addres ates of s wh depo y race/ sit, s et tock hnic s, b ity dispar onds, ret itie ireme s in D nt s C p avin lan el gs, transa igibilitc y are tion acc muc ounts h large (savin r amgs ong famil , checkiie ng, s 597 (Em non savin -His gs pan pri ployee or icit he ie Benefit R s and ad. retireme esearch I nt pre ns par titute, ation amo Novemb ng Bl er 3 ack a 0, 2023 nd H ) fis or a panic nothe Americans r look at reti . rement plan participation. non-Hispanic; 11.9 percent were Black; 9.8 percent were Hispanic; and 12.1 percent were another race. money with belo ma w rk -me et accounts, dian incomes t and c han am all accounts), ong famil directl ies w y it hel h ad bove mut-ual funds, median in sa comes vings b . 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