Summary
• Work-place retirement plans: The majority of Americans who have a retirement plan get it through the work-place, and Americans with a retirement plan have significantly more wealth than those without one. Determining who is eligible for and participates in an employment-based retirement plan is the first step toward assessing the adequacy of Americans’ retirement savings.
• Gradual progress: The most recent federal data offer some encouraging news on retirement plan participation, as a higher percentage of all workers were offered, participated in, and were vested in a retirement plan in 2003 than was measured in the previous survey in 1998.
• Key measurements, as determined by the U.S. Census Bureau’s most recent Survey of Income and Program Participation (SIPP) data, for 2003 (Topical Module 7), for all workers (public and private sectors) age 16 and over:
--> Sponsorship level: 63 percent worked for an employer or union that sponsored a retirement plan in 2003, up from 60 percent in 1998.
--> Participation level: 48 percent participated in a plan in 2003, up from 44 percent in 1998 (which was a decrease from 1993).
--> Vesting rate: 44 percent say they were entitled to some pension benefit or lump-sum distribution if they left their job, up from 41 percent in 1998.
• Continuing shift toward defined contribution plans: The data continue to demonstrate the well-documented shift away from “traditional” defined benefit (DB) pension plans and toward defined contribution (DC) plans: A DC plan was the primary retirement plan for 57.7 percent of participants in 2003, up from 51.5 percent in 1998 and more than double the 1988 level. Correspondingly, 40.5 percent said a DB plan was their primary retirement plan in 2003, down from 46.3 percent in 1998 and 56.7 percent 1988.
• Worker contributions: The average employee contribution for workers who participated in a salary reduction (DC) retirement plan was 7.5 percent in 2003, versus 7.4 percent in 1998 and 6.6 percent in 1988. However, as the salary reduction plans have grown in importance for workers, it is likely that their contributions to these plans will need to grow even faster if workers expect to be able to afford to maintain their current lifestyle in retirement.