Benefits March 20, 2008

Retirement Plan Assets Concentrated in High-Income Families

March 20, 2008 (PLANSPONSOR.com) - Assets in employment-based defined contribution plans (typically 401(k) plans), individual retirement accounts (IRAs), and Keogh plans are concentrated in families with high family income and higher net worth, according to a study released by the Employee Benefit Research Institute (EBRI).
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An EBRI press release said the study, in the March 2008 EBRI Notes, reports individual account retirement plans assets totaled $6.767 trillion in 2004, according to the most recent data from the Survey of Consumer Finances. More than 63% of assets in individual account retirement plans were held by individuals with a family income of $100,000 or more in 2004.

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More than 25% of assets were held by individuals with a family income between $50,000 and $99,999, and around 11% of assets were held by individuals with family incomes below that.

In addition, according to the release, the study found:

  • 90.5% of assets were held by white non-Hispanics;
  • 9.5% of assets were held by nonwhites;
  • 14.2% of assets were held by individuals with a high school diploma or less;
  • 10.7% of assets were help by individuals with some college education; and
  • 75.1% assets were held by individuals with a college degree.

The most significant shift in individual account assets from 1992 – 2004 has been the fraction of assets held by families headed by individuals age 55 or older – more than half of all individual account retirement plan assets and more than two-thirds of IRA and Keogh plan assets.

At the same time, the study released by EBRI reports that among families with low levels of total financial assets, savings in individual accounts retirement plans accounted for a greater share of their total financial assets than for families with high total financial assets. For families in the bottom 25% of total net worth, individual account retirement plans accounted for 31.2% of their total financial assets, compared with 26.2% for families in the top 10% of total net worth.

In addition, the study found:

  • Individual account retirement plans accounted for 43.1% of the total financial assets of families headed by nonwhites, compared with 31.2% of families headed by white non-Hispanics.
  • For those in families where the family head had an income of $20,000 to $39,999 a year, individual account retirement plans accounted for 28.5% of their total financial assets, compared with 26% for families with an annual income of $150,000 a year or more.

The study is available at www.ebri.org .

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