Retirement Assets Grow, But Are Some Being Left Behind?

More than a year after the start of the pandemic, you may be pleased with the overall growth of the assets in your company’s retirement plan. After all, more assets generally mean better prospects for retirement security for your valued employees. But according to a recent triennial survey of wealth held by Americans, some may not be enjoying growth to the same degree as the overall population — nationally and at your company. The Employee Benefit Research Institute (EBRI) examined data from the Federal Reserve’s Survey of Consumer Finances (SCF) for the year ending 2019. True, that’s pre-COVID-19 and thus doesn’t account for the impact of the virus. But EBRI’s analysis, published in their March 2021 Issue Brief, reveals real disparities facing minority families as they strive to save for retirement.

Summarizing the retirement landscape in general, the information shows that 18.2% of families had an active participant in both a defined contribution plan and a defined benefit plan. While just 15.8% of families with an active participant in an employer-sponsored retirement plan had only a defined benefit plan in 2019, 66% of those families had an active participant in only an employer defined contribution plan, up from 37.5% in 1992.

The importance of individual account plans as a source of wealth for American workers has grown over the years. In 1992, the average account balance for families with money in individual account plans was $79,262. By 2019, the figure had risen to $258,453. The money within these accounts has become the main source of assets for Americans investing in them, accounting for 68.3% at the median.

Individual account plan balances play a large role in overall wealth, too. Those families who have balances in individual account plans have a much higher net worth than families without one. Median net worth in 2019 was $284,050 for families with individual account plan assets, compared to $35,460 for families without.

EBRI’s Issue Brief points out that families headed by someone whose race or ethnicity is in the minority are generally less prepared for retirement when preparation is based on their retirement assets. The gap between families having white, non-Hispanic heads as compared to minority family heads has persisted since at least 1992, according to the SCF. Not only were the minority-headed families much less likely to have an individual account plan, the amount of assets held within them was much less. Still, when families with minority heads did have individual account plans, they tended to contain a larger proportion of their total financial assets than those of white, non-Hispanic-headed families.

EBRI’s Issue Brief is available here: https://tinyurl.com/EBRI-SCF-2019 and from there you can view the full analysis

This material was prepared by LPL Financial, LLC.

This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

© 2021 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance, nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.