Downturn Knocks 15% Off Retirement Plans, Study Finds

But the number of families covered by some form of retirement plan has held steady over the past five years.

Median retirement account balances in defined-contribution plans dove by at least 15% from the end of 2007 to mid-June of this year, according to an analysis of Federal Reserve data issued Tuesday by the Employee Benefit Research Institute.

The drop in median asset levels in 401(k) plans, individual retirement accounts, and Keogh plans reflects the downturn in the economy, according to the EBRI study. At the same time, however, the number of families covered by some form of retirement plan has held steady, the Washington-based data gatherer found.

According to the study, 40.6% of families have a participant from a current job in either a traditional defined-benefit pension plan or defined-contribution plan. That is up from 38.8% in 1992 but virtually unchanged from 40.3% in 2004.

Among all families with a defined-contribution plan, the median plan balance was $31,800 in 2007, up 16% from 2004. According to the research estimates, that midpoint dropped 16.4% (to $26,578) from year-end 2007 to mid-June 2009. Losses were bigger for families with more than $100,000 a year in income (down 22%) or having a net worth in the top 10% (down 28%).

EBRI also found that a “significant shift in the plan type occurred from 1992–2007.” In that period, the share of families with a retirement plan who had only a defined-benefit plan slid from 40.0% to 17.4%. At the same time, the share of families taking part in only a defined-contribution plan soared from 37.5% in 1992 to 60.3% in 2007. The percentage of families with both types of plans was unchanged from 1992 to 2007, at 23%.

The study is based on the 2007 Survey of Consumer Finances, the Fed’s triennial survey of wealth. EBRI adjusted the data to account for the economic downturn in 2008, which wasn’t reflected in the SCF results.

The researchers adjusted account balances of defined-contribution plans and IRAs based on the asset allocation reported within the plans by using equity and bond market returns from January 1, 2008, to June 19 of this year.

 

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