Ownership of 401(k)-type plans among families participating in an employer's retirement plan more than doubled, from 31.6% in 1992 to 79.5% in 2007. Three years later, during the financial crisis, 401(k) ownership continued to increase, to 82.1%.

According to a report by the Employee Benefit Research Institute, based on the most recent data from the Federal Reserve Board's Survey of Consumer Finances, defined contribution plan balances-including money in 401(k)s, accounted for 61.4% of families' total financial assets in 2010, up from 58.1% in 2007. Moreover, the percentage of family heads who were eligible to participate in a defined contribution plan and actually did so remained virtually unchanged during this time.

“Those eligible to participate in a retirement plan continued to participate, which may help change the likelihood of a lower retirement standard for many Americans,” Craig Copeland, EBRI senior research associate and author of the report, said in a statement.

The continued growth of 401(k) participation is a bright spot in an otherwise gloomy report. The percentage of families owning an IRA or Keogh plan declined from 30.6% in 2007 to 28.0% in 2010. Overall, the percentage of families with a retirement plan from a current employer, a previous employer's defined contribution plan, or an IRA/Keogh declined from 66.2% in 2007 to 63.8% in 2010.

Altogether, the EBRI report concludes that the most recent data, along with other EBRI research, indicate that many people are unlikely to afford a comfortable retirement. “Americans lost a tremendous amount of wealth between 2007 and 2010, and the percentage of families that participated in an employment-based retirement plan and/or owned an IRA decreased as well,” Copeland said.

The bottom line is that more Americans are relying on 401(k)s for their retirement while fewer are counting on IRAs. Advisors should incorporate clients' holdings of 401(k) and other defined contribution plans into their evaluation of those clients' retirement readiness.

Donald Jay Korn writes for Financial Planning, a SourceMedia publication.

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