EBRI Issue Brief

Having Both a 401(k) Plan and an IRA: How Much Does This Change the Retirement Asset Picture?

Aug 20, 2020 32  pages


Oftentimes, reporting on retirement assets focuses on the average balances of either 401(k) plans or individual retirement accounts (IRAs). While this provides invaluable information on the behavior within those accounts, it does not show a complete picture of the amount of retirement assets workers or retirees have accumulated. Many individuals hold both 401(k) plans and IRAs — especially as they grow older and move from job to job. This Issue Brief combines the EBRI/ICI 401(k) Database of 27 million plan participants with the EBRI IRA Database of 19 million accountholders to provide a unique perspective on the relative amount of assets held by those having both account types. This allows for a more accurate picture of total retirement assets across individuals. Key findings include:

  • Having both a 401(k) plan and an IRA results in a higher balance over time: The ratio of the average combined 401(k) plan/IRA balance to the average 401(k) plan balance (of all of those having a 401(k) plan each year) was 2.48 at the end of the study. The average combined balance compared with the average IRA balance was 2.53 times higher in the final year of the study.
  • However, many individuals with both account types did not maintain both in all years studied: Accounts were closed when individuals changed jobs or dollars were rolled over to other accounts as individuals retired. This affected the amount accumulated among those with both account types relative to those with only one account type. In fact, the ratio of the average combined balance of those having 401(k) plan/IRA balances in every year to the average combined balance of those having both at only some point was 2.03 at the end of the study.
  • Further, maintaining just a 401(k) plan generated as much in balances as the amount generated by individuals who owned both account types only at some point in the period studied. This is likely due to breaks in service among the latter group providing opportunities for leakage.
  • While 401(k) plan assets make up the bulk of the assets of those who maintained both account types throughout the study, owners/participants of those having both only at some point were more likely to have had an IRA for more years than a 401(k) plan: The average number of years for an IRA was 5.5, compared with 4.0 years of owning a 401(k) plan.

Any attempt to estimate the assets held by workers needs to take into account the workers’ ages, tenures, and number of years of having both account types in the same year. This study helps put numbers to what would be expected to be accumulated given these different traits of workers. In addition, it shows the potential of what can be accumulated in total if workers are able to maintain both account types throughout their working lives (or large portions of them). It also shows that this potential is not always met as workers change jobs, stop contributing, or take money out of (close) their accounts, resulting in retirement asset leakage.