EBRI Issue Brief

Individual Account Retirement Plans: An Analysis of the 2004 Survey of Consumer Finances

May 4, 2006 32  pages


• This Issue Brief examines the incidence of individual account plans among families, as well as the average amount of assets accumulated in these accounts, using the most recent data from the Federal Reserve’s Survey of Consumer Finances (SCF).

Increasing importance of individual accounts: Individual account retirement plans continue to grow in importance as a source of retirement income for future retirees in both the public and private sectors. The wealth that workers are able to accumulate in individual plans during their working years will be crucial to the ability of many workers to maintain a comfortable standard of living in retirement.

Employment-based plan participation: In 2004, 40.3 percent of all families had a participant in an employment-based retirement plan (either a defined benefit or defined contribution plan) from a current job, down from 41.6 percent in 2001. Among these families, those with only a defined benefit (pension) plan decreased from 40.0 percent in 1992 to 24.1 percent in 2004. Families with only a defined contribution plan followed the opposite trend, rising from 37.5 percent in 1992 to 51.9 percent in 2004. Families with a 401(k)-type plan reached 73.5 percent in 2004, up from 66.5 percent in 2001 and 31.6 percent in 1992.

IRA/Keogh participation: In 2004, 29.1 percent of all families owned either an individual retirement account (IRA) or a Keogh plan, down from 31.4 percent in 2001.

Defined contribution account values: Among all families with a defined contribution plan in 2004, the median (midpoint) plan balance was $25,000, up 137 percent from 1992 and 30 percent from 2001.

IRA/Keogh account values: Among all families with an IRA/Keogh plan, the median plan balance was $30,000 in 2004, a 4 percent increase from $28,758 in 2001.

Key demographic factors: Participation in an employment-based retirement plan is strongly linked to key demographic factors: higher-income, better-educated, white, non-Hispanic heads of families tended to be significantly more likely to have a retirement plan (and higher balances) than their counterparts.

Individual accounts dominate family savings: In 2004, defined contribution plan assets comprised 56.4 percent of total financial assets for the median family that participated in such a plan. Among families with defined contribution and/or IRA/Keogh plans in 2004, these assets comprised a median of 62.5 percent of their total financial assets. Both figures mark a significant increase from 2001 levels.

IRA types, by family ownership and assets: By ownership, the most commonly owned IRA was the regular IRA (44.6 percent of the family heads who owned an IRA owned only that type), followed by the rollover IRA (18 percent) and the Roth IRA (15.9 percent). By assets, the regular IRA-only type held 33.4 per-cent of all family financial assets, followed by regular and rollover IRAs combined (26.6 percent), rollover-only IRAs (24.2 percent), and Roth IRAs (4.0 percent of assets).