Numbers don’t lie. In addition to improving one’s retirement security, putting away money in some sort of retirement savings account appears to be critical to growing one’s overall wealth, according to a recent report by the Employee Benefit Research Institute (EBRI).
A significant portion of current and future retirees’ overall financial assets are individual account retirement plan (IA plan) assets—including defined contribution (DC) plans such as 401k plans, as well as Keogh plans for the self-employed and individual retirement accounts (IRAs) for savings outside of the workplace.
In an analysis of the Survey of Consumer Finances, EBRI discovered IA plan assets rose substantially between 1992 and 2016. What’s more, “the median amount of financial assets attributable to IA plans for families owning them rose by more than half, where IA plans account for more than two-thirds of these families’ financial assets”—jumping to 67.9 percent in 2016 compared to 44.3 percent in 1992.
“Not only do individual account assets make up a large portion of the financial assets of those that own them, but families with individual account assets have substantially higher levels of net worth than those without them,” Craig Copeland, senior research associate at EBRI, said in a statement.
In fact, data from 2016 showed the median net worth of families with an active participant was $249,950. The median among families without IA plan assets is striking by comparison: just $19,200. What’s more, IA plan savers “are also more likely to own a home than those without these assets.”
Among families with IA plan assets, other significant survey findings include:
- Those having a DB plan only decreased from 40 percent in 1992 to 17.2 percent in 2016.
- Those having a DC plan only increased from 37.5 percent in 1992 to a little over 66 percent in 2013 and 2016.
- Families with both types of plans fell from 22.5 percent in 1992 to 16.2 percent in 2016.
- In 2016, 29.7 percent of participating families with heads of household ages 35 to 44 owned IRA/Keogh plans; among those with heads of household ages 65 and older, this figure was 74.8 percent.
- Participants’ average account balance increased from $75,300 in 1992 and $208,639 in 2013 to $232,502 in 2016.
“Individual account assets are clearly an important source of assets for families that own them. Consequently, when it comes to policies that may affect them, these plans should be considered carefully,” Copeland concluded.
Jessa Claeys is a writer, editor and graphic designer.