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[IWS] CRS: U.S. HOUSEHOLD SAVINGS FOR RETIREMENT IN 2010 [30 April 2013]

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)

 

U.S. Household Savings for Retirement in 2010

John J. Topoleski, Analyst in Income Security

April 30, 2013

http://www.fas.org/sgp/crs/misc/R43057.pdf

[full-text, 24 pages]

 

Summary

Whether households have sufficient savings from which to ensure adequate income throughout

retirement is a concern of households and, therefore, policymakers. The retirement income

landscape has been changing over the past few decades. Although most households are eligible to

receive Social Security benefits in retirement, over the past 30 years, the types of non-Social

Security sources of retirement income have been changing. About half of the U.S. workforce is

covered by an employer-sponsored pension plan. An increasing number of employers offer

defined contributions (DC) pension plans (i.e., tax-advantaged accounts in which employee, and

sometimes employer, contributions accrue investment returns) in lieu of traditional defined

benefit (DB) pension plans (i.e., monthly payments to a retiree by a former employer). This shift

in the nature of employer-sponsored pensions places more responsibility on workers to financially

prepare for their own retirement. Households also save for retirement using Individual Retirement

Accounts (IRAs), into which contributions, up to a specified limit, are tax-deductible for

individuals without an employer-sponsored pension or who have an employer-sponsored pension

and who earn less than specified limits.

 

Congress has several reasons for its interest in the retirement preparedness of American

households: income from Social Security may be insufficient to provide for an adequate standard

of living in retirement for U.S. households; congressional actions may encourage or discourage

employer and household efforts to provide for their own well-being in retirement; and the U.S.

Treasury will forego $117 billion in FY2013 as a result of tax policies that are designed to

encourage employer and worker retirement savings. President Obama’s FY2014 budget would

prohibit contributions to DC pension plans and IRAs that have a value over $3.4 million. This

threshold is specified to be equivalent to the maximum annual payment allowed from a DB

pension plan, which is $205,000 in 2013.

 

This report provides data on a variety of household wealth measures in 2010 from the Federal

Reserve’s triennial Survey of Consumer Finances. Although the amount of retirement assets is the

primary focus of the report, other measures of wealth (such as the amount of total assets, financial

assets, total debt, net worth, and housing equity) are also included. The report classifies the

amount of assets and debt by the age of the head of the household for both single and married

households. In general, the amount of household wealth is higher for married households than for

single households. Household wealth generally increases as the age of the head of the household

increases, although some measures decrease for those households in which the head of the

household is aged 75 or older. In general, the median values are less than the average values,

which is an indication that some households hold relatively large amounts of wealth compared

with most households.

 

Among households with retirement assets, households in which the head is younger than 55 years

old are more likely to own DC pension plan assets than they are likely to own assets from IRAs,

whereas households in which the head is aged 55 or older are more likely to have IRA assets.

 

Ownership of a principal residence is likely to be a factor that affects the accumulation of

retirement assets. An important saving goal for younger households is home ownership, whereas

preparing for retirement is an important saving goal for older households. As the age of the head

of the household increases, the percentage of assets represented by the household’s principal

residence decreases, although there is not a discernible pattern to the percentage of wealth that

retirement assets represent.

 

Contents

Introduction ...................................................................................................................................... 1

Types of Retirement Plans and Accounts ......................................................................................... 3

Defined Benefit Pension Plans .................................................................................................. 3

Defined Contribution Pension Plans .......................................................................................... 3

Individual Retirement Accounts ................................................................................................ 3

Household Net Worth in 2010 ......................................................................................................... 4

Assets, Debt, and Net Worth Among Single and Married Households in 2010 .............................. 5

Defined Contribution and IRA Balances Among All Households in 2010 .................................... 11

Percentage of Households with an IRA Balance, DC Plan Balance, or DB Pension in

2010 ............................................................................................................................................ 13

DC and IRA Balances Among Households with DC or IRA Balances in 2010 ............................ 14

Value of a Principal Residence as a Percentage of Total Assets in 2010 ....................................... 15

Home Equity as a Percentage of the Value of the Principal Residence in 2010 ............................ 16

Implications for Policy................................................................................................................... 17

 

Figures

Figure 1. Net Worth in 2010 Among Single and Married Households ............................................ 5

Figure 2. DC Plan and IRA assets in 2010 Among Single and Married Households .................... 11

Figure 3. Percentage of Households in 2010 with an IRA Balance, DC Account Balance, or a Defined Benefit Pension ........................ 14

Figure 4. DC and IRA Balances in 2010 Among Single and Married Households with DC  or IRA Balances ......................................... 15

Figure 5. Value of a Principal Residence in 2010 as a Percentage of Total Assets ........................ 16

Figure 6. Principal Residence Equity as a Percentage of the Value of the Principal Residence ........................................... 17

 

Tables

Table 1. Median Assets, Debt, Net Worth and Income Among Single Households in 2010 ........... 7

Table 2. Average Assets, Debt, Net Worth, and Income Among Single Households in 2010 ....................................... 8

Table 3. Median Assets, Debt, Net Worth and Income Among Married Households in 2010 ..................................... 9

Table 4. Average Assets, Debt, Net Worth and Income Among Married Households in 2010 .................................... 10

Table 5. Distribution of Retirement Assets Among Households in 2010 ...................................... 12

 

Appendixes

Appendix. Survey of Consumer Finances ..................................................................................... 19

 

Contacts

Author Contact Information........................................................................................................... 20

 

 

________________________________________________________________________

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.

 




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