Retirement Account Ownership Down, Values Up

Based on its Survey of Consumer Finances (SCF), the Federal Reserve said ownership of retirement accounts—including individual retirement accounts (IRAs), Keogh accounts, and employer-sponsored defined contribution (DC) and defined benefit (DB) accounts—fell below 50% in 2013, continuing the downward trend also observed between the 2007 and 2010 surveys. The conditional median value of retirement accounts rose 25%, from $47,200 in 2010, to $59,000 in 2013, and the mean value rose 10%, from $183,400 in 2010 to $201,300 in 2013. The Federal Reserve attributes this growth to a combination of resurgent stock markets and increased contributions by retirement plan participants.

Among families whose head is between ages 35 and 64, those in the bottom half of the usual income distribution saw overall declines in retirement plan participation between 2007 and 2010 and then again between 2010 and 2013, from 48.2% in 2007 to 40.2% in 2013 This overall drop was driven by declines in both IRA and DC coverage, as there was little change in the fraction of families with a DB plan. Those families in the next 40% of the income distribution saw only a slight net fall in overall retirement plan participation between 2007 and 2013, since between 2010 and 2013, they experienced a slight increase in participation driven by increases in participation for all three classes of retirement assets. Families in the top 10% of the income distribution saw a slight increase in retirement plan participation from 2007 to 2013, reaching 94.6% in 2013.

The Federal Reserve notes the value of assets held within IRAs and DC plans are among the most significant components of many families’ balance sheets and are a significant determinant of their future retirement security. The average combined IRA and DC pension balance for families owning those assets in the lowest income group was $39,100 in 2013. That figure is close to the 2010 average balance of $40,500, but down more than 20% from the 2007 value of $50,600. Those in the upper-middle income group saw an increase in their average total balance between 2007 and 2010. While there was little change in average balance from 2007 to 2010, between 2010 and 2013, the average balance for this group increased by approximately $20,000, or 16%, from $126,900 to $147,300. Average balances fell for those in the top income group, and particularly for those at the very top. For example, the fraction of families in the top 10% of the income distribution with retirement account balances exceeding $1,000,000 fell from 14% in 2010 to 9% in 2013.

The SCF also indicates friends, relatives and associates remain the most common sources of information used to make investing decisions for consumers in 2013 (40.8%). This is followed by sellers of financial services (38.3%); the Internet (35.3%); and lawyers, accountants and other financial advisers (31.8%). Fewer families reported consulting print media or material in the mail in 2013 than in 2010.

The Federal Reserve Bulletin is here.