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Summary

Pension analysts refer to Social Security, employer-sponsored retirement plans, and personal savings as the "three-legged stool" of retirement income, but for some workers at least one of the legs is missing. Many workers fail to save adequately for retirement and many are not covered by an employer-sponsored retirement plan. Data from the Federal Reserve Board's Survey of Consumer Finances (SCF) indicate that only 58% of households with an employed head or spouse between the ages of 21 and 64 included at least one worker who participated in an employer-sponsored retirement plan in 2001. Most of them participated in savings and thrift plans, in which the worker must decide whether to contribute to the plan, and how to invest the funds. Only 25% of households included at least one worker who was covered by a defined benefit pension plan that guarantees a fixed monthly payment for life. The Federal Reserve Board collects data on household assets and liabilities through its SCF. The most recent data from this survey were collected in 2001. According to the SCF, 47.8 million households with at least one worker between the ages of 21 and 64 -- (63%) -- owned one or more retirement accounts in 2001. An estimated 27.8 million households -- (37%) -- did not own a retirement savings account of any kind. Among the households who owned a retirement savings account of any kind in 2001, the mean value of all such accounts was $95,943. The median value of all accounts was $27,000. The median value of the retirement accounts held by households headed by a worker between the ages of 55 and 64 was $55,000 in 2001. For a 65-year-old retiring in June 2004, $55,000 would be sufficient to purchase a level, single-life annuity that would pay $400 per month, based on the federal Thrift Savings Plan's current annuity interest rate of 4.125%. A balance of $55,000 would be sufficient to purchase a joint-and-survivor annuity of $385 per month at age 65 at an interest rate of 4.125%. The Bureau of the Census collects data on household assets and liabilities through its Survey of Income and Program Participation (SIPP). The SIPP most recently collected data on household assets and liabilities in late 2001. According to the SIPP, an estimated 39.7 million households with at least one worker between the ages of 21 and 64 -- (52%) -- owned one or more retirement accounts, including IRAs, Keogh accounts, and 401(k)-type accounts in 2001. An estimated 37.3 million such households -- (48%) -- did not own a retirement savings account of any kind. Among the 39.7 million households that owned a retirement savings account of any kind in 2001, the mean value of all such accounts was $56,800. The median value of all the households' accounts was $22,400. Both surveys show that rates of retirement plan ownership and average account balances rise steadily with income and with level of education. Homeowners and married couples are more likely to have a retirement account than are renters or single persons. Both surveys show that while the rate of IRA ownership among employees of small businesses differs only a little from that of workers at large businesses, workers at firms with more than 100 employees are much more likely to participate in a 401(k)-type plan than are employees of smaller businesses.

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