Security Beyond Social Security

When it comes to retirement finances beyond Social Security, Americans are depending on just two primary sources, according to a new report.

Not surprisingly, home equity and retirement accounts — 401(k)-type plans and IRAs — account for nearly all the assets that many families have to depend on in retirement outside of Social Security and traditional pension plans, according to new research from the nonpartisan Employee Benefit Research Institute (EBRI).

The EBRI analysis looks at the level of assets held by families with a working family head ages 25-64 in so-called “individual account” (IA) retirement plans, and compares that with all of their financial assets (liquid assets that are most easily exchanged, such as bank accounts, stocks, bonds and IA retirement plan assets), as well as equity in their homes.

For instance, when measuring what percentage that IA assets plus home equity represents of all financial assets plus home equity of families with a working head ages 25-64, the median (midpoint) percentage for these families is 78.2%, with the median for families with heads ages 55-64 reaching 87.4%. Said another way, half of all of these families have IA assets plus home equity accounting for more than 78.2% of all of their financial assets plus home equity.

Median ‘Well’

When focusing only on those families that actually have IA assets, the median percentages of financial assets that these IA plans represent substantially increases. For example, of those families that have a DC plan at a current employer, the median percentage of financial assets that the DC assets plus IRA assets represents is 75.2%. Furthermore, for families that have any IA assets, the median percentage of financial assets plus home equity that are represented by IA assets plus home equity is 86.0%.

Overall, those with IA assets have significantly more assets, and the IA assets make up a large share of financial assets. Those without IA assets typically have very low overall assets, so they have almost nothing to draw from for retirement expenses. Consider that among families with a working family head ages 25 to 64 without an IA plan, nearly 8 out of 10 (79.6%) have financial assets less than $10,000, compared with just 13.1% of these families with an IA plan.

In summary, the EBRI research notes that when measuring families’ financial asset holdings at retirement, it is overwhelmingly the case that just IA assets plus home equity represent almost all of what families have for retirement outside of Social Security and DB plans.

The data come from the Federal Reserve’s Survey of Consumer Finances (SCF), considered the best source of information on Americans’ wealth.

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