Wednesday, May 31, 2006
Tweet[IWS] CRS: Retirement Savings & Household Wealth: Trends from 2001 to 2004 [22 May 2006]
IWS Documented News Service
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
________________________________________________________________________
Congressional Research Service (CRS)
Order Code RL30922
Retirement Savings and Household Wealth: Trends from 2001 to 2004
Updated May 22, 2006
Patrick Purcell, Specialist in Social Legislation, Domestic Social Policy Division
http://opencrs.cdt.org/rpts/RL30922_20060522.pdf
[full-text, 21 pages]
Summary
Since about 1980, the proportion of workers who participate in employersponsored
retirement plans has remained stable at about half of the workforce. Over
the past 25 years, however, there has been a shift by employers from defined benefit
(DB) pensions which pay a retirement benefit in the form of a lifelong annuity
to defined contribution (DC) plans, which are more like savings accounts maintained
by employers on behalf of each participating employee. One of the key distinctions
between a defined benefit plan and a defined contribution plan is that in a DB plan,
it is the employer who bears the investment risk. The employer must ensure that the
pension plan has sufficient assets to pay the benefits promised to workers and their
surviving dependents. In a DC plan, the worker bears the risk of investment losses.
The workers account balance depends on how much he or she contributes to the plan
and how the plans underlying investments perform.
Once every three years, the Federal Reserve Board collects data on household
assets and liabilities through the Survey of Consumer Finances (SCF). According to
the most recent survey, 47.9% of workers under age 65 participated in employersponsored
retirement plans both DB and DC in 2004, down from 49.6% in
2001. The decline in retirement plan participation between 2001 and 2004 was most
heavily concentrated among workers under 45 years old, male workers, non-white
workers, unmarried workers, those who did not attend college, and those with
household incomes in the bottom half of the income distribution.
The Survey of Consumer Finances shows that 56.3 million households owned
at least one retirement account in 2004 whether an individual retirement account
(IRA), a 401(k) plan, or other employment-based savings plan compared with
56.9 million households that owned at least one such account in 2001. The
proportion of households that owned a retirement account fell from 53.4% in 2001
to 50.2% in 2004. The median balance in all such accounts (measured in 2004
dollars) rose from $30,462 in 2001 to $36,000 in 2004. The number of households
that owned a defined contribution plan from current or past employment rose from
38.3 million in 2001 to 38.8 million in 2004. The median balance in these accounts
(in 2004 dollars) rose from $19,172 in 2001 to $28,000 in 2004. The number of
households that owned an IRA or Keogh plan for the self-employed fell from 33.4
million in 2001 to 32.6 million in 2004. The median balance in these accounts (in
2004 dollars) rose from $28,758 in 2001 to $30,000 in 2004.
The median value in 2004 of all retirement accounts owned by households
headed persons between the ages of 55 and 64 was $88,000, up from $58,580 in
2001. For a 65-year-old retiring in May 2006, $88,000 would be sufficient to
purchase a level, single-life annuity that would pay $653 per month, based on the
federal Thrift Savings Plans current annuity interest rate of 5.375%. This amount
would replace just 15% of the median household income of $53,400 among
households headed by individuals who were 55 to 64 years old in 2004.
Contents
Trends in Retirement Plan Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
401(k) plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Survey of Consumer Finances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Participation in Employer-Sponsored Retirement Plans . . . . . . . . . . . . . . . . 3
Recent Trends in Retirement Plan Participation . . . . . . . . . . . . . . . . . . 3
Congress and Retirement Saving . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Retirement Savings of American Households . . . . . . . . . . . . . . . . . . . . . . . . 6
Summary of Retirement Plan Ownership . . . . . . . . . . . . . . . . . . . . . . . 7
Retirement Account Balances by Age of Household Head . . . . . . . . . 11
Retirement Plan Ownership and Demographic Traits . . . . . . . . . . . . . 12
Household Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
List of Tables
Table 1. Workers Participation in Retirement Plans in 2001 . . . . . . . . . . . . . . . 4
Table 2. Workers Participation in Retirement Plans in 2004 . . . . . . . . . . . . . . . 5
Table 3. Household Retirement Account Balances in 2001 . . . . . . . . . . . . . . . . . 9
Table 4. Household Retirement Account Balances in 2004 . . . . . . . . . . . . . . . . 10
Table 5. Household Retirement Account Balances, by Age of Householder . . . 12
Table 6. Household Ownership of Individual Retirement Accounts and Keogh Accounts in 2004 . . . . . 14
Table 7. Household Ownership of Defined Contribution Plans from Current or Past Job in 2004 . . . . . . 15
Table 8. Median Household Net Worth in 2001 and 2004, by Age of Household Head . . . . . . ... . . . . . 16
______________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
________________________________________________________________________
Congressional Research Service (CRS)
Order Code RL30922
Retirement Savings and Household Wealth: Trends from 2001 to 2004
Updated May 22, 2006
Patrick Purcell, Specialist in Social Legislation, Domestic Social Policy Division
http://opencrs.cdt.org/rpts/RL30922_20060522.pdf
[full-text, 21 pages]
Summary
Since about 1980, the proportion of workers who participate in employersponsored
retirement plans has remained stable at about half of the workforce. Over
the past 25 years, however, there has been a shift by employers from defined benefit
(DB) pensions which pay a retirement benefit in the form of a lifelong annuity
to defined contribution (DC) plans, which are more like savings accounts maintained
by employers on behalf of each participating employee. One of the key distinctions
between a defined benefit plan and a defined contribution plan is that in a DB plan,
it is the employer who bears the investment risk. The employer must ensure that the
pension plan has sufficient assets to pay the benefits promised to workers and their
surviving dependents. In a DC plan, the worker bears the risk of investment losses.
The workers account balance depends on how much he or she contributes to the plan
and how the plans underlying investments perform.
Once every three years, the Federal Reserve Board collects data on household
assets and liabilities through the Survey of Consumer Finances (SCF). According to
the most recent survey, 47.9% of workers under age 65 participated in employersponsored
retirement plans both DB and DC in 2004, down from 49.6% in
2001. The decline in retirement plan participation between 2001 and 2004 was most
heavily concentrated among workers under 45 years old, male workers, non-white
workers, unmarried workers, those who did not attend college, and those with
household incomes in the bottom half of the income distribution.
The Survey of Consumer Finances shows that 56.3 million households owned
at least one retirement account in 2004 whether an individual retirement account
(IRA), a 401(k) plan, or other employment-based savings plan compared with
56.9 million households that owned at least one such account in 2001. The
proportion of households that owned a retirement account fell from 53.4% in 2001
to 50.2% in 2004. The median balance in all such accounts (measured in 2004
dollars) rose from $30,462 in 2001 to $36,000 in 2004. The number of households
that owned a defined contribution plan from current or past employment rose from
38.3 million in 2001 to 38.8 million in 2004. The median balance in these accounts
(in 2004 dollars) rose from $19,172 in 2001 to $28,000 in 2004. The number of
households that owned an IRA or Keogh plan for the self-employed fell from 33.4
million in 2001 to 32.6 million in 2004. The median balance in these accounts (in
2004 dollars) rose from $28,758 in 2001 to $30,000 in 2004.
The median value in 2004 of all retirement accounts owned by households
headed persons between the ages of 55 and 64 was $88,000, up from $58,580 in
2001. For a 65-year-old retiring in May 2006, $88,000 would be sufficient to
purchase a level, single-life annuity that would pay $653 per month, based on the
federal Thrift Savings Plans current annuity interest rate of 5.375%. This amount
would replace just 15% of the median household income of $53,400 among
households headed by individuals who were 55 to 64 years old in 2004.
Contents
Trends in Retirement Plan Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
401(k) plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Survey of Consumer Finances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Participation in Employer-Sponsored Retirement Plans . . . . . . . . . . . . . . . . 3
Recent Trends in Retirement Plan Participation . . . . . . . . . . . . . . . . . . 3
Congress and Retirement Saving . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Retirement Savings of American Households . . . . . . . . . . . . . . . . . . . . . . . . 6
Summary of Retirement Plan Ownership . . . . . . . . . . . . . . . . . . . . . . . 7
Retirement Account Balances by Age of Household Head . . . . . . . . . 11
Retirement Plan Ownership and Demographic Traits . . . . . . . . . . . . . 12
Household Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
List of Tables
Table 1. Workers Participation in Retirement Plans in 2001 . . . . . . . . . . . . . . . 4
Table 2. Workers Participation in Retirement Plans in 2004 . . . . . . . . . . . . . . . 5
Table 3. Household Retirement Account Balances in 2001 . . . . . . . . . . . . . . . . . 9
Table 4. Household Retirement Account Balances in 2004 . . . . . . . . . . . . . . . . 10
Table 5. Household Retirement Account Balances, by Age of Householder . . . 12
Table 6. Household Ownership of Individual Retirement Accounts and Keogh Accounts in 2004 . . . . . 14
Table 7. Household Ownership of Defined Contribution Plans from Current or Past Job in 2004 . . . . . . 15
Table 8. Median Household Net Worth in 2001 and 2004, by Age of Household Head . . . . . . ... . . . . . 16
______________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
# posted by SBasefsky : 2:48 PM
