EBRI Issue Brief

The Status of American Families' Accumulations in Individual Account Retirement Plans and Differences by Race/Ethnicity: An Analysis of the 2019 Survey of Consumer Finances

Mar 11, 2021 30  pages


Individual account (IA) retirement plans are the dominant source of financial assets for retirement among current and future retirees, and they continue to grow.

Individual account (IA) plans include employment-based retirement savings plans financed by both employer and employee contributions (most notably, defined contribution (DC) plans such as 401(k) plans), as well as Keogh plans for the self-employed and individual retirement accounts (IRAs) for savings outside of the workplace (and in certain cases, they are a workplace savings plan).

This Issue Brief assesses the status of American families' accumulations in IA plans, both in terms of ownership and amounts accumulated. A particular focus of this study will be on the relative holdings in these plans of families with heads of different races and ethnicities. The Survey of Consumer Finances (SCF), the Federal Reserve’s triennial survey of wealth, is the basis for this study.

The Survey of Consumer Finances (SCF) is a leading source of data on Americans’ wealth, as it provides information on the incidence of retirement plan ownership and account balances that families have accumulated along with all the other assets that families may have amassed. The questions in SCF allow for not only the calculation of the percentage of families owning individual retirement accounts (IRAs) but also for estimation of the distribution of IRA assets across types — regular, rollover, and Roth IRAs.

The analysis of SCF data finds that:

The retirement landscape continues to shift:

  • In 2019, 66.0 percent of all families who had an active participant in an employment-based retirement plan from a current employer had a defined contribution (DC) plan only. This is up from 37.5 percent in 1992.
  • Among these families with an active participant, a significant shift occurred from 1992 to 2019: The percentage having a defined benefit (DB) plan only decreased from 40.0 percent in 1992 to 15.8 percent in 2019.
  • The percentage of families with both types of plans decreased from 22.5 percent in 1992 to 18.2 percent in 2019.

Individual accounts are an important financial resource:

  • The average account balance of those families owning IA plans increased from $79,262 in 1992 to $258,453 in 2019, but this only increased from $247,289 in 2016.
  • As DC plans have proliferated in the private sector, the assets in all IA retirement plans have become the predominate source of financial assets for American families holding these assets. In 2019, IA assets constituted 68.3 percent of financial assets at the median among these families owning IA assets.
  • Not only do IA assets make up a large portion of families’ financial assets, but those with IA assets also have substantially higher levels of net worth than those families without IA assets. The median net worth for families who owned IA assets was $284,050 in 2019 compared with $35,460 for families without IA assets.

The value of IA assets and the ownership of IA plans was not equal across all families by race and ethnicity:

  • In fact, families with minority heads were much less likely to have IA retirement plans, and when they did own these plans, the median amount held in them was significantly less than for those with white, non-Hispanic heads.
  • Yet, the IA assets when held by these families were a larger share of their total financial assets than for families with white, non-Hispanic heads.
  • This gap between families with different races/ethnicities has persisted since at least 1992.
  • Consequently, families with minority heads are generally in a much worse position in their preparation for retirement in terms of IA retirement plan assets and as a result have much less flexibility in financing retirement without these assets.

While the results of this study do not answer questions about the level of IA assets needed for retirement, they show the continued importance of individual account retirement plans. Consequently, any policy that alters this system could have consequences — either positive or negative — for Americans’ ability to fund a comfortable retirement.