IRAs offer new key to retirement readiness

Employers looking to amplify their employees’ retirement prospects might look to the growing individual retirement account field, as involvement in employer-sponsored retirement plans remains largely unchanged.

The percentage of families with an employment-based retirement plan from a current employer dropped slightly to 36.2% in 2013 from 37.9% in 2010 and from 38.8% in 1992, according the Employee Benefits Research Institute’s November brief.

The new report details a 2013 survey of consumer finances and shows a stable rate for family heads that were eligible to participate in defined contribution plans and choose to do so: 78.7% in 2013 and 78.2% in 2010.

EBRI notes that ownership of an employment-based retirement plan from a current employer is strongly linked to family income and educational levels.

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In 2013, only 2.6% of families with annual income less than $10,000 had a plan from a current job, compared with 67.1 percent of the families with income of $100,000 or more. With regard to education, only 12% of households without a high school degree currently had plans. In contrast, just over 50% of families led by an employee who had obtained a college degree or higher noted plan ownership.

And although ownership of employment-based plans and IRAs declined or remained unchanged, the median account balances of those families owning an individual account (IA) retirement plan increased in 2013. The value rose from $22,992 in 1992 to $38,608 in 2001 and $59,000 in 2013.

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The median percentage of families’ total financial assets comprised by IA retirement plan assets also remained unchanged from 2010 to 2013 but still accounted for a clear majority of these assets:

• The median IA retirement plan assets’ share of financial assets increased from 44.3% in 1992 to 70.3% in 2010, where it remained in 2013.
• Across all demographic groups in 2013, these assets’ share at the median of total financial assets was at least 49.2%.
• While regular IRAs account for the largest percentage of IRA ownership, rollover IRAs had a slightly larger share of assets than regular IRAs in 2013.

EBRI says the increase in IRA wealth is expected to continue in the future, as more workers will be in defined contribution plans and will be in them for a longer period of their working lives.
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