Data and Research September 17, 2018

Over Half of Americans Have Nothing Saved in a Retirement Account

The median retirement account balance among all U.S. workers is "zilch"

Reported by

The National Institute on Retirement Security (NIRS) analyzed U.S. Census Bureau data and learned that, among all working Americans, the median retirement account balance is zero. Further findings were that 57%, or 100 million Americans, own no assets in a workplace retirement plan, individual retirement account (IRA) or pension.

Four out of five working Americans have less than one year’s income saved in retirement accounts. Seventy-seven percent fall short of retirement savings targets for their age, based on working until they reach 67. Moreover, a large majority of working Americans are unable to meet even a substantially reduced savings target.

Growing income inequality widens the gap in retirement account ownership. Workers in the top income quartile are five times more likely to have retirement accounts than workers in the lowest income quartile. Individuals with retirement accounts have more than three times the annual income of individuals without any.

“The facts and data are clear,” says Diane Oakley, executive director of NIRS. “Retirement is in peril for most working-class Americans. When all working individuals are considered—not just the minority with retirement accounts—the typical working American has zero, zilch, nothing saved for retirement. What this means is that the American dream of a modest retirement after a lifetime of work now is a middle-class nightmare. Even among workers who have accumulated savings in retirement accounts, the typical worker had an account balance of $40,000.”

Data and Research September 17, 2018

Correlation Found Between Profitability and Quality of 401(k) Plans

Above-average-rated plans are more apt to be found at companies with 20% to 80% higher profitability than are average-rated plans, says T. Rowe Price.

Reported by

T. Rowe Price Retirement Plan Services Inc. learned in new research, which it is reporting in “Where 401(k) Design and Corporate Profitability Cross Paths,” that companies with strong performance have quality 401(k) plans. The study evaluated 485 401(k)s with more than $50 million in assets and a BrightScope rating, which served as a proxy for 401(k) plan quality.

T. Rowe Price discovered that 401(k)s with an “above average” rating are strongly associated with companies that have between 20% and 80% higher profitability measures than companies with 401(k) plans rated as “average.”

Further, 401(k) plans rated as “poor” are strongly associated with companies that have profitability measures up to 80% lower than companies having average-rated plans.

Companies whose plans are rated “great” are more likely to have gross margins between 20% and 40% higher than companies with average-rated 401(k) plans. Companies with a “great” 401(k) are also more apt to have net income per employee between 40% and 80% higher than are companies with average-rated plans.

Revenue per employee is between 20% and 60% higher for companies with 401(k) plans rated great than companies with 401(k) plans rated average, and companies with plans rated “below average” or poor have up to 80% lower revenue per employee.

“While correlation isn’t the same as causality, our findings provide strong evidence that there’s a connection between better-designed and higher-quality 401(k) plans and a company’s bottom line,” says Joshua Dietch, head of T. Rowe Price’s retirement and financial education team, which conducted the study with the company’s customer and market insights team and quantitative equities group. “We’ve long believed this was the case, but this is the first time we’ve been able to prove the correlation.”

Aimee DeCamillo, head of T. Rowe Price Retirement Plan Services Inc., adds: “Our research shows that there may be corollary benefits when companies invest in their 401(k)s—and disadvantages when they don’t.”

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