The Markets November 15, 2006

Retirement Plans Boost Mutual Fund Ownership

The gap between mutual fund ownership outside of retirement plans and inside of retirement plans narrowed in 2006, a recent survey by the Investment Company Institute (ICI) revealed.
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An estimated 54.9 million US households and 96 million individual investors own mutual funds, according to the report, with 38.3 million households owning mutual funds through their retirement plans. While the percentage of U.S. households owning funds has stayed about the same since 2003, a decade ago, an estimated 10.4 million more households owned funds outside employer plans than inside these plans. According to ICI, the growth of fund ownership through workplace retirement plans has been largely fueled by the shift from traditional pensions to defined contribution plans.

Most mutual fund shareholders have moderate household incomes and are in their peak earning
and saving years. About three in five U.S. households owning mutual funds have incomes between $25,000 and $99,999, and about two-thirds are headed by individuals between the ages of 35 and 64. The incidence of mutual fund ownership increases with household income, which explains why mutual fund owners generally have incomes higher than the national average, according to ICI. For instance, 70 percent of all U.S. households with incomes of $50,000 or more
own funds in 2006, compared with 26% of households with incomes less than $50,000.

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At present 72% of shareholders age 65 or older have Internet access, up from 63% a year ago. In contrast, Internet access among shareholders age 35 or younger increased modestly, from 94% a year ago to 96% this year. An annual ICI survey of fund ownership and Internet usage reveals that nearly 55 million U.S. households own mutual funds and more than 70% of these households use the Internet at least once a day.

The full ICI report is online here

Data & Research November 15, 2006

EBRI: Women Edge Out Men in Retirement Plans

Women ages 21 to 64 have a slight edge when it comes to saving for retirement in an employer plan, according to a new study.
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A news release from the Employee Benefit Research Institute (EBRI) said that 56.4% of women in that age group – with the group considered to have the strongest workforce connection – save for their Golden Years in a workplace plan. That compares to 53.7% of men in the same age group and focuses on full-time, full-year wage and salary workers. Both levels were down about two percentage points from 2004, according to the EBRI data.

Meanwhile, looking at poll numbers for all workers, men had about a 1% lead over women with 41.3 % of men participating in plans, compared to 40.4 % participation for women.

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“It appears that female workers’ lower probability of participation in the aggregate was a result of their overall lower earnings and lower rates of full-time work in comparison with males,” wrote Craig Copeland, EBRI senior research associate and author of the study.

Significant differences appeared when wage and salary workers ages 21 to 64 were separated into public and private sectors. Slightly less than 75% of public-sector workers participated in an employment-based retirement plan in 2005, compared to 41.7% of private-sector workers.

Other highlights include:

  • About 58% of all working-age (21 – 64) wage and salary employees worked for an employer or union that sponsored a retirement plan in 2005. Of those, slightly less than half (47%) participated in a retirement plan in 2005, down from 48.3% a year earlier.
  • Among full-time, full-year wage and salary workers of both sexes, about 55% participated in a retirement plan in 2005, down from almost 57% a year earlier.
  • Hispanic wage and salary workers were significantly less likely (about 28%) than either white (nearly 52%) or black (43%) workers to participate in a retirement plan.
  • Wage and salary workers in the South, West, and Southwest had the lowest levels of participation, while those in the upper Midwest and Northeast had the highest levels. Florida (38%) had the lowest participation level, while Minnesota had the highest (56%).

Overall, participation in retirement plans increased significantly when the labor market was tight in the late 1990s and decreased when unemployment went up in 2001 and 2002, the study reported. With a more stable job market in 2003 and 2004, the participation trend flattened out.

The EBRI report is online here

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