Order Code RL30922
CRS Report for Congress
Received through the CRS Web
Retirement Savings and Household Wealth:
Trends from 2001 to 2004
Updated May 22, 2006
Patrick Purcell
Specialist in Social Legislation
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

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Retirement Savings and Household Wealth: Trends
from 2001 to 2004
Summary
Since about 1980, the proportion of workers who participate in employer-
sponsored retirement plans has remained stable at about half of the workforce. Over
the past 25 years, however, there has been a shift by employers from defined benefit
(DB) pensions — which pay a retirement benefit in the form of a lifelong annuity —
to defined contribution (DC) plans, which are more like savings accounts maintained
by employers on behalf of each participating employee. One of the key distinctions
between a defined benefit plan and a defined contribution plan is that in a DB plan,
it is the employer who bears the investment risk. The employer must ensure that the
pension plan has sufficient assets to pay the benefits promised to workers and their
surviving dependents. In a DC plan, the worker bears the risk of investment losses.
The worker’s account balance depends on how much he or she contributes to the plan
and how the plan’s underlying investments perform.
Once every three years, the Federal Reserve Board collects data on household
assets and liabilities through the Survey of Consumer Finances (SCF). According to
the most recent survey, 47.9% of workers under age 65 participated in employer-
sponsored retirement plans — both DB and DC — in 2004, down from 49.6% in
2001. The decline in retirement plan participation between 2001 and 2004 was most
heavily concentrated among workers under 45 years old, male workers, non-white
workers, unmarried workers, those who did not attend college, and those with
household incomes in the bottom half of the income distribution.
The Survey of Consumer Finances shows that 56.3 million households owned
at least one retirement account in 2004 — whether an individual retirement account
(IRA), a 401(k) plan, or other employment-based savings plan — compared with
56.9 million households that owned at least one such account in 2001. The
proportion of households that owned a retirement account fell from 53.4% in 2001
to 50.2% in 2004. The median balance in all such accounts (measured in 2004
dollars) rose from $30,462 in 2001 to $36,000 in 2004. The number of households
that owned a defined contribution plan from current or past employment rose from
38.3 million in 2001 to 38.8 million in 2004. The median balance in these accounts
(in 2004 dollars) rose from $19,172 in 2001 to $28,000 in 2004. The number of
households that owned an IRA or Keogh plan for the self-employed fell from 33.4
million in 2001 to 32.6 million in 2004. The median balance in these accounts (in
2004 dollars) rose from $28,758 in 2001 to $30,000 in 2004.
The median value in 2004 of all retirement accounts owned by households
headed persons between the ages of 55 and 64 was $88,000, up from $58,580 in
2001. For a 65-year-old retiring in May 2006, $88,000 would be sufficient to
purchase a level, single-life annuity that would pay $653 per month, based on the
federal Thrift Savings Plan’s current annuity interest rate of 5.375%. This amount
would replace just 15% of the median household income of $53,400 among
households headed by individuals who were 55 to 64 years old in 2004.

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Contents
Trends in Retirement Plan Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
401(k) plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Survey of Consumer Finances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Participation in Employer-Sponsored Retirement Plans . . . . . . . . . . . . . . . . 3
Recent Trends in Retirement Plan Participation . . . . . . . . . . . . . . . . . . 3
Congress and Retirement Saving . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Retirement Savings of American Households . . . . . . . . . . . . . . . . . . . . . . . . 6
Summary of Retirement Plan Ownership . . . . . . . . . . . . . . . . . . . . . . . 7
Retirement Account Balances by Age of Household Head . . . . . . . . . 11
Retirement Plan Ownership and Demographic Traits . . . . . . . . . . . . . 12
Household Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
List of Tables
Table 1. Workers’ Participation in Retirement Plans in 2001 . . . . . . . . . . . . . . . 4
Table 2. Workers’ Participation in Retirement Plans in 2004 . . . . . . . . . . . . . . . 5
Table 3. Household Retirement Account Balances in 2001 . . . . . . . . . . . . . . . . . 9
Table 4. Household Retirement Account Balances in 2004 . . . . . . . . . . . . . . . . 10
Table 5. Household Retirement Account Balances, by Age of Householder . . . 12
Table 6. Household Ownership of Individual Retirement Accounts and
Keogh Accounts in 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Table 7. Household Ownership of Defined Contribution Plans from Current or
Past Job in 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Table 8. Median Household Net Worth in 2001 and 2004, by Age of
Household Head . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

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Retirement Savings and Household Wealth:
Trends from 2001 to 2004
Trends in Retirement Plan Design
Since about 1980, the proportion of workers who participate in employer-
sponsored retirement plans has remained stable at approximately half of the
workforce. Over the past 25 years, however, there has been a shift by employers
from defined benefit plans to defined contribution plans. Defined benefit (“DB”)
plans usually are funded solely by employer contributions and investment earnings
on those contributions and they pay a retirement benefit in the form of a lifelong
annuity. The amount of the annuity usually is based on the employee’s length of
service and average salary. Defined contribution (“DC”) plans, in contrast, are more
like savings accounts maintained by employers on behalf of each participating
employee. In the most common type of DC plan — those established under Section
401(k) of the tax code — the employee defers a portion of his or her salary, which
is invested in stocks, bonds, or other assets. The employer often matches some or
all of the employee’s contribution to the plan. At retirement, the balance in the
account is the sum of past contributions plus interest, dividends, and capital gains —
or losses. The account balance is often distributed to the departing employee as a
single lump sum. One of the key distinctions between a defined benefit plan and a
defined contribution plan is that in a DB plan, the employer bears the investment risk.
The employer must ensure that the plan has sufficient assets to pay the benefits
promised to workers and their surviving dependents. In a DC plan, the worker bears
the risk of investment losses. The worker’s account balance depends on how much
he or she contributes to the plan and how the plan’s underlying investments perform.
401(k) plans. In 1978, Congress added section 401(k) to the Internal Revenue
Code. Three years later, the Internal Revenue Service (IRS) published regulations
for “cash or deferred arrangements” established under Section 401(k). Since that
time, DC plans have overtaken traditional defined benefit pensions in the number of
plans, the number of participants, and total assets. Typically, in a 401(k) plan, the
employee must decide whether to participate, how much to contribute, and how to
invest the assets. In 1998 and 2000, the IRS issued rulings that permit employers to
enroll employees automatically in 401(k) plans. Revenue Ruling 98-30 allows
employers to automatically enroll new employees in 401(k) plans. Revenue Ruling
2000-8 allows automatic enrollment in 401(k) plans of current employees who
previously had not elected to participate. In either case, employees who are enrolled
automatically must be given the option to drop out of the plan. In 2004, the IRS
published a general information letter clarifying that the amount deducted from the
employee’s pay and contributed to the plan can be any amount up to the annual
contribution limit under IRC §402(g), and that the plan can automatically increase
the employee’s contribution over time, such as after each pay raise. Again, the IRS
emphasized that employees must be informed of these plan provisions and must have

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CRS-2
the option to change the amount of their contribution or to stop contributing to the
plan altogether.
Over the past 10 years, many large employers have converted their traditional
DB pensions to “hybrid” plans that have characteristics of both DB and DC plans.
The most popular hybrid is called a cash balance plan. In a cash balance plan, the
benefit is defined in terms of an account balance. The employer makes contributions
to the plan and pays interest on the accumulated balance. However, these account
balances are merely bookkeeping devices that describe the employee’s accrued
benefit. They are not individual accounts owned by the participants, as is the case
with 401(k) plans. Because the employer is required to provide a benefit that is equal
to at least the sum of the employer’s contributions plus the accrued interest on those
contributions, a cash balance plan is legally considered to be a defined benefit plan.
The Survey of Consumer Finances
This Congressional Research Service (CRS) report presents data on retirement
plan participation and retirement savings account ownership collected through the
Survey of Consumer Finances (SCF) in 2001 and 2004. The SCF is an interview
survey sponsored by the Board of Governors of the Federal Reserve System in
cooperation with the Department of the Treasury. It is conducted once every three
years to collect information on the assets and liabilities of U.S. households, the
sources and amounts of their income, their demographic characteristics, employment,
and participation in employer-sponsored health and retirement plans. Data from the
SCF are widely used by economists at the Federal Reserve, other government
agencies, and by private-sector research organizations and academic institutions to
study trends in the amount and distribution of assets and liabilities among U.S.
households. Since 1992, SCF data have been collected by the National Organization
for Research at the University of Chicago (NORC). In 2001, 4,449 households were
interviewed for the SCF, representing a total of 106.5 million U.S. households. For
the 2004 SCF, members of 4,522 households were interviewed.1 The 2004 interview
sample represented 112.1 million households.
Most of the information collected in the Survey of Consumer Finances — such
as total assets and liabilities — is reported at the household level. The only data
reported separately for the householder and his or her spouse or partner describe
these individuals’ employment, pension coverage, and demographic characteristics.
In the tables that follow, Table 1 and Table 2 show participation in retirement plans
by individual workers, who were either the householder or the spouse or partner of
the householder.2 All of the other tables in the report, which describe ownership of
1 For more information, see [http://www.federalreserve.gov/pubs/oss/oss2/scfindex.html].
2 This report refers to households rather than to families because, according to the
researchers at the Federal Reserve Board, the unit of analysis in the SCF is more comparable
to the Census Bureau’s definition of a household than to its definition of a family. In the
survey, the head is designated as the male in a mixed-sex couple and the older person in a
same-sex couple. This designation is not intended to convey “a judgment about how an
individual family is structured.” It is merely a means of organizing the data consistently.
(continued...)

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CRS-3
retirement accounts and the average balances in those accounts, represent ownership
of those accounts by households rather than by individual members of households.
Participation in Employer-Sponsored Retirement Plans
Social Security, employer-sponsored retirement plans, and personal savings are
sometimes called the “three-legged stool” of retirement income, but for many
workers at least one of the legs of the stool is missing. Coverage of workers under
Social Security is nearly universal, but only about half of all workers in the United
States are included in employer-sponsored retirement plans.
Recent Trends in Retirement Plan Participation. Data from the Survey
of Consumer Finances indicate that the percentage of workers under age 65 who
participated in employer-sponsored retirement plans fell from 49.6% in 2001 to
47.9% in 2004.3 (See Table 1 and Table 2.) Three-fourths of workers who
participated in employer-sponsored retirement plans in 2004 were enrolled in defined
contribution plans, such as 401(k) plans. Just 18.4% of workers participated in
defined benefit pension plans, and only 7% of workers participated in both types of
plan. The decline in retirement plan participation between 2001 and 2004 was most
heavily concentrated among workers in particular demographic groups:
! Among workers under 35 years old, retirement plan participation fell
from 40.5% in 2001 to 35.6% in 2004. Participation among workers
35 to 44 years old fell from 54.2% in 2001 to 50.0% in 2004.
! Among non-white workers, participation in employer-sponsored
retirement plans fell from 45.7% in 2001 to 39.1% in 2004.
! Among working men, participation in employer-sponsored
retirement plans fell from 53.4% in 2001 to 49.2% in 2005.
! Participation in retirement plans among workers who were widowed,
divorced, or never-married declined from 44.6% in 2001 to 40.6%
in 2004.
! Participation among workers under age 65 who did not graduate
from high school fell from 24.1% to 18.0% between 2001 and 2004,
while among those who had only a high school diploma or a G.E.D.
certificate, retirement plan participation fell from 43.5% in 2001 to
39.8% in 2004.
! Among workers with household incomes in the lowest quarter of the
income distribution, participation in employer-sponsored retirement
plans fell from 23.2% in 2001 to 18.7% in 2004, while among those
with household incomes in the next-lowest income quartile,
retirement plan participation fell from 43.7% to 42.8%.
2 (...continued)
(For more information, see Bucks, Kennickell, and Moore, Federal Reserve Bulletin, 2006.)
3 The Congressional Research Service (CRS) found similar results in an analysis of the
Census Bureau’s Current Population Survey (CPS). Data from this survey show that
between 2001and 2004, participation in employer-sponsored retirement plans among
working householders and spouses under age 65 fell from 50.5% to 48.8%.

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CRS-4
Table 1. Workers’ Participation in Retirement Plans in 2001
Worker
Number of Any Type
Defined
Defined
Both
Characteristics
Workersa
of Planb
Contributionb
Benefitb
Typesb
Relationship to householder
Householder
71,710
51.5%
40.5%
19.6%
8.9%
Spouse/partner
38,161
46.1
34.1
18.6
6.6
Age
Under 35
33,241
40.5
33.1
11.6
4.2
35 to 44
34,041
54.2
43.9
19.7
9.6
45 to 54
28,301
56.4
40.2
27.6
11.6
55 to 64
14,288
46.4
32.9
19.6
6.6
Race
White, non-Hispanic
84,808
50.8
39.4
20.1
8.9
Black, Hispanic, or Asian
25,063
45.7
34.5
16.6
5.4
Sex
Male
56,555
53.4
42.1
20.9
9.8
Female
53,317
45.5
34.1
17.5
6.3
Marital status
Married
72,697
52.2
39.9
21.4
9.3
Not married
37,175
44.6
35.0
15.0
5.7
Education
College graduate
37,209
64.1
50.4
27.0
13.6
Some college
28,183
46.6
36.2
17.1
6.9
High School graduate
35,130
43.5
32.7
15.5
4.9
Less than 12 years of school
9,350
24.1
16.6
9.2
1.8
Household income in 2000c
Top income quartile
32,471
63.4
50.4
27.0
14.3
Second income quartile
29,291
59.5
46.2
23.2
10.0
Third income quartile
25,992
43.7
31.8
15.8
4.1
Bottom income quartile
22,117
23.2
17.4
6.8
1.1
Full-time or part-time worker
Part-time
16,297
21.2
14.7
8.4
2.3
Full-time
93,575
54.6
42.4
21.1
9.1
Establishment size
Under 20 employees
29,590
16.9
14.1
3.8
1.2
20 to 99 employees
16,885
41.9
34.3
11.5
4.3
100 to 499 employees
18,780
60.0
45.8
21.5
7.6
500 or more employees
44,616
69.8
52.5
31.5
14.3
Union status
Union
18,915
77.4
46.1
46.1
15.0
Non-union
90,956
43.8
36.6
13.7
6.7
Total
109,871
49.6%
38.2%
19.3%
8.1%
Source: CRS analysis of the Federal Reserve Board’s 2001 Survey of Consumer Finances.
a. Employed householders and spouses/partners under age 65, in thousands.
b. Percentage of workers who participated in employer-sponsored retirement plans, by type of plan.
c. Among households in which the householder or spouse was a worker under age 65, median income
in 2000 (adjusted to 2004 dollars) was $53,645. Households with income of more than $87,584
were in the top income quartile and households with income under $29,560 were in the bottom
quartile. Because median income is higher in larger households than smaller households, more
than 50% of workers live in households that are in the top two quartiles of household income.

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CRS-5
Table 2. Workers’ Participation in Retirement Plans in 2004
Number of Any Type
Defined
Defined
Both
Worker Characteristics
Workersa
of Planb
Contributionb
Benefitb
Typesb
Relationship to householder
Householder
74,103
48.5%
37.8%
18.5%
7.8%
Spouse/partner
37,931
46.8
34.5
18.0
5.9
Age
Under 35
31,978
35.6
28.6
10.7
4.2
35 to 44
32,448
50.0
38.2
18.8
7.0
45 to 54
30,976
54.6
40.0
24.2
9.7
55 to 64
16,810
55.4
43.1
21.4
9.4
Race
White, non-Hispanic
80,794
51.4
39.7
19.6
8.1
Black, Hispanic, or Asian
31,239
39.1
28.8
15.0
4.7
Sex
Male
57,375
49.2
38.7
19.3
8.8
Female
54,658
46.6
34.6
17.3
5.4
Marital status
Married
72,985
51.9
39.3
20.5
7.9
Not married
39,049
40.6
31.9
14.4
5.6
Education
College graduate
38,975
63.3
49.1
23.9
9.8
Some college
30,513
46.4
35.1
19.1
7.7
High School graduate
33,180
39.8
30.3
14.6
5.1
Less than 12 years of
9,365
18.0
13.1
6.3
1.4
Household income in 2003c
Top income quartile
32,712
64.1
53.0
23.1
12.0
Second income quartile
29,597
57.4
41.4
24.4
8.6
Third income quartile
26,796
42.8
31.1
16.5
4.8
Bottom income quartile
22,929
18.7
13.9
5.8
1.1
Full-time or part-time worker
Part-time
19,872
23.1
17.6
8.6
3.3
Full-time
92,432
53.1
40.7
20.4
8.0
Establishment size
Under 20 employees
31,148
15.1
11.9
3.9
0.8
20 to 99 employees
17,993
43.0
34.3
11.6
2.9
100 to 499 employees
17,615
56.2
41.4
22.1
7.3
500 or more employees
45,279
69.3
52.8
29.5
13.1
Union status
Union
17,444
78.1
45.4
48.5
15.8
Non-union
94,590
42.4
35.1
12.8
5.5
Total
112,034
47.9%
36.7%
18.4%
7.1%
Source: CRS analysis of the Federal Reserve Board’s 2004 Survey of Consumer Finances.
a. Employed householders and spouses/partners under age 65, in thousands.
b. Percentage of workers who participated in employer-sponsored retirement plans, by type of plan.
c. Among households in which the householder or spouse was a worker under age 65, median income
in 2003 (adjusted to 2004 dollars) was $52,372. Households with income of more than $90,367
were in the top income quartile and households with income under $29,780 were in the bottom
quartile. Because median income is higher in larger households than smaller households, more
than 50% of workers live in households that are in the top two quartiles of household income.

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CRS-6
Congress and Retirement Saving
Congress has acted several times over the years to encourage workers to save
for retirement, mainly by allowing income taxes to be deferred on amounts that
workers or their employers contribute to certain types of savings plans established to
prepare for retirement. For example:
! The Technical Amendments Act of 1958 (P.L. 85-866) added Internal
Revenue Code Section 403(b), authorizing deferral of taxes on
employer and employee contributions to retirement plans of
religious, charitable, educational, research, and cultural institutions.
! The Self-Employed Individuals Tax Retirement Act of 1962 (P.L.
87-792) authorized tax-deferred Keogh Plans (after Representative
Eugene J. Keogh of New York) for workers who are self-employed.
! The Employee Retirement Income Security Act of 1974 (P.L. 93-406)
authorized Individual Retirement Accounts (IRAs) in which eligible
contributions and investment earnings are tax-deferred.
! The Revenue Act of 1978 (P. L. 95-600) added Internal Revenue
Code Section 401(k). Employers and employees can make pre-tax
contributions to retirement plans established under §401(k).
Investment earnings accrue on a tax-deferred basis until withdrawn.
! The Revenue Act of 1978 also added Section 457 to the Internal
Revenue Code, permitting state and local government employees to
defer income taxes on a portion of salary deposited into a retirement
plan. Investment earnings are not taxed until they are withdrawn.
! The Taxpayer Relief Act of 1997 (P.L. 105-34) authorized the Roth
IRA, which accepts only after-tax contributions but provides for
tax-free distributions of funds held for at least five years in the
account.
! The Economic Growth and Tax Relief Reconciliation Act of 2001
(P.L. 107-16) increased the maximum contribution to IRAs and
employer-sponsored §401(k), §403(b), and §457 plans and allows
people age 50 or older to make additional contributions to IRAs and
to retirement plans authorized under §401(k), §403(b), and §457.
! Congress has authorized retirement savings plans that are designed
specifically for small employers. These include the Simplified
Employee Pension (SEP) — a type of IRA — authorized in 1978
and the Savings Incentive Match Plan for Employers (SIMPLE),
authorized in 1996.
Retirement Savings of American Households
With the trend away from defined benefit plans to defined contribution plans,
workers now bear much of the responsibility of preparing for retirement. Workers
whose employers offer savings or “thrift” plans such as those authorized under
Sections 401(k), 403(b), and 457 of the Internal Revenue Code can accumulate assets
on a tax-deferred basis while they are working. In addition, most people with earned
income may contribute to an IRA. In both cases, taxes are paid when the funds are

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CRS-7
withdrawn, and a penalty may apply if the withdrawal occurs before retirement.4 For
many people, the marginal income tax rate that they will face in retirement will be
lower than the rate that was applied to their earnings prior to retirement.
The following tables show the retirement savings of all households and those
households in which there was at least one worker under age 65. According to the
SCF, of the 106.5 million U.S. households in 2001, there were 75.7 million
households in which the head or spouse was an employed adult under age 65. In
2004, out of 112.1 total households, there were 79.6 million households that included
at least one worker under age 65. The tables show the number of households that
owned at least one retirement account as well as the average balances held in those
accounts. The tables do not include the portion of retirement wealth that is
represented by the present value of benefits accrued under Social Security and
employer-sponsored defined-benefit pension plans. They include only the balances
accumulated in IRAs, Keogh plans for the self-employed, and employer-sponsored
defined contribution plans, including — but not limited to — those authorized under
§401(k), §403(b), and §457 of the tax code.
Mean and Median Values of Retirement Accounts
The average values of retirement accounts are shown in this report in terms of both
the “mean” and the “median” values. The “mean” is a simple arithmetic average.* It is
calculated by adding up the reported values of all accounts and then dividing this total by
the number of account-holders. As a measure of central tendency — what an “average”
represents — the mean is flawed because it can be influenced by a relatively small
number of unusually high or low values. The median is another kind of average that is
more representative of the population because it is not biased by unusually high or low
values. The median is calculated by ordering all of the observed values from highest to
lowest and finding the value that lies exactly at the midpoint of the distribution. One-half
of all observed values are greater than the median and the other half are less than the
median.
* A survey weight has been assigned to each household. The weights sum to the number of
households in the United States. The means in the tables are the weighted means for each
observation.
Summary of Retirement Plan Ownership. The data from the SCF show
that both the number and percentage of households that owned a retirement account
of any kind — whether an individual retirement account (IRA), a 401(k) plan, or
other employment-based plan — fell from 2001 to 2004. (See the top panels of
Table 3 and Table 4.) The number of households that owned at least one retirement
account fell from 56.9 million in 2001 to 56.3 million households in 2004. The
proportion of households that owned a retirement account fell from 53.4% in 2001
to 50.2% in 2004. The number of households that owned a defined contribution plan
from current or past employment — i.e., that owned a retirement plan other than a
4 In a traditional IRA, pre-tax contributions can be made only if the worker is not covered
by an employer-sponsored retirement plan or has income below amounts specified in law.
All investment earnings accrue on a tax-deferred basis. Roth IRAs accept only after-tax
contributions; however, withdrawals from a Roth IRA during retirement are tax-free.

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CRS-8
traditional IRA, a Roth IRA, or a Keogh account — rose from 38.3 million to 38.8
million, but this increase was not enough to prevent the percentage of households that
owned an employment-based retirement account from falling from 36.0% in 2001 to
34.6% in 2004. Both the number and percentage of house holds that owned an IRA
or Keogh plan also fell between 2001 and 2004. In 2004, 32.6 million households
(29.0%) owned an IRA or Keogh plan, compared to 33.4 million (31.4%) in 2001.
In both 2001 and 2004, only about 15 million U.S. households owned both an IRA
or Keogh plan and a defined contribution plan from current or past employment.
This number comprised 13.9% of all households in 2001 and 13.4% in 2004.
Although the percentage of U.S. households that owned a retirement account fell
between 2001 and 2004, the mean and median account balances among those who
owned such accounts rose during this period. Measured in constant 2004 dollars,
among households who owned a retirement account of any kind, the median
combined balance of their accounts rose from $30,462 in 2001 to $36,000 in 2004,
an increase of 18.2%. The mean combined account balance increased from $110,210
to $129,310, a rise of 17.3%. Among households that owned at least one defined
contribution plan from current or past employment, the median combined balance of
all their defined contribution accounts rose from $19,172 in 2001 to $28,000 in
2004, an increase of 46.0%. The mean value of the accounts rose from $73,313 to
$99,993. Among households that owned at least one IRA or Keogh plan, the median
combined balance of all their IRA and Keogh accounts rose from $28,758 in 2001
to $30,000 in 2004, an increase of just 4.3%. The mean value of these accounts
remained virtually unchanged at about $104,000.
According to the SCF, there were 75.7 million households with an employed
head or spouse under age 65 in 2001, and 79.6 million such households in 2004.
(See the bottom panels of Table 3 and Table 4.) Both the number and percentage
of these households that owned at least one retirement account fell between 2001 and
2004. An estimated 46.3 million households with a worker under 65 owned one or
more retirement accounts in 2004, 1.2 million fewer households than owned at least
one retirement account in 2001. The number of worker-households that owned a
defined contribution plan from current or past employment remained unchanged at
about 36.2 million, while the number of worker-households that owned an IRA or
Keogh plan fell from 25.0 million in 2001 to 23.8 million in 2004. While the number
and percentage of households with a worker under age 65 that owned a retirement
account fell between 2001 and 2004, the average account balances of those who
owned these accounts increased. Among worker-households that owned a retirement
savings account of any kind, the median value (in 2004 dollars) of all such accounts
rose from $28,760 in 2001 to $35,000 in 2001. The mean value of all the
households’ accounts rose from $101,422 in 2001 to $122,349 in 2004.

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CRS-9
Table 3. Household Retirement Account Balances in 2001
(amounts in 2004 dollars)
Number of
Percent
Mean
Median
Households
of
Value of Value of
(thousands) Households Accounts Accounts
All households
106,496
100%
Owned either an IRA/Keogh or a defined
contribution plan
56,883
53.4
All retirement accounts, all types
$110,210
$30,462
Owned a defined contribution plana
38,295
36.0
All defined contribution accounts
73,313
19,172
All retirement accounts, all types
107,611
30,888
Owned an IRA or Keogh planb
33,400
31.4
All IRA/Keogh accounts
103,637
28,758
All retirement accounts, all types
157,643
53,255
Owned both an IRA/Keogh plan and a
defined contribution plan
14,812
13.9
All IRA/Keogh accounts
88,670
27,693
All defined contribution accounts
121,777
35,148
All retirement accounts, all types
210,446
90,960
Owned neither an IRA/Keogh nor a
defined contribution plan
49,613
46.6
Number of
Mean
Median
Households
Percent of
Value of
Value of
(thousands)
Households
Accounts
Accounts
Households with a worker under 65
75,693
100%
Owned either an IRA/Keogh or a defined

contribution plan
47,487
62.7
All retirement accounts, all types
$101,422
$28,760
Owned a defined contribution plana
36,217
47.8
All defined contribution accounts
72,322
20,237
All retirement accounts, all types
104,205
30,888
Owned an IRA or Keogh planb
25,026
33.1
All IRA/Keogh accounts
87,784
22,367
All retirement accounts, all types
153,005
51,125
Owned both an IRA/Keogh plan and a
13,757
18.2
defined contribution plan
All IRA/Keogh accounts
83,937
25,562
All defined contribution accounts
118,651
36,213
All retirement accounts, all types
202,588
87,338
Owned neither an IRA/Keogh nor a
defined contribution plan
28,206
37.3
Source: CRS analysis of the Federal Reserve Board’s 2001 Survey of Consumer Finances.
a. May also have owned an IRA or Keogh plan.
b. May also have owned a defined contribution plan.

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CRS-10
Table 4. Household Retirement Account Balances in 2004
Number of
Percent
Mean
Median
Households
of
Value of
Value of
(thousands)
Households Accounts Accounts
All households
112,109
100%
Owned either an IRA/Keogh or a
defined contribution plan
56,331
50.2
All retirement accounts, all types
$129,310
$36,000
Owned a defined contribution plana
38,770
34.6
All defined contribution accounts
99,933
28,000
All retirement accounts, all types
135,488
40,000
Owned an IRA or Keogh planb
32,565
29.0
All IRA/Keogh accounts
103,893
30,000
All retirement accounts, all types
174,238
61,000
Owned both an IRA/Keogh plan and a
defined contribution plan
15,005
13.4
All IRA/Keogh accounts
91,870
30,000
All defined contribution accounts
150,912
50,000
All retirement accounts, all types
242,782
107,000
Owned neither an IRA/Keogh nor a
defined contribution plan
55,778
49.8
Number of
Percent
Mean
Median
Households
of
Value of
Value of
(thousands)
Households
Accounts
Accounts
Households with a worker under 65
79,622
100%
Owned either an IRA/Keogh or a

defined contribution plan
46,287
58.1
All retirement accounts, all types
$122,349
$35,000
Owned a defined contribution plana
36,280
45.6
All defined contribution accounts
98,395
28,000
All retirement accounts, all types
132,282
40,000
Owned an IRA or Keogh planb
23,842
29.9
All IRA/Keogh accounts
86,706
27,000
All retirement accounts, all types
174,350
65,000
Owned both an IRA/Keogh plan and a
defined contribution plan
13,834
17.4
All IRA/Keogh accounts
88,868
30,000
All defined contribution accounts
149,149
50,000
All retirement accounts, all types
238,017
107,700
Owned neither an IRA/Keogh nor a
defined contribution plan
33,335
41.9
Source: CRS analysis of the Federal Reserve Board’s 2004 Survey of Consumer Finances.
a. May also have owned an IRA or Keogh plan.
b. May also have owned a defined contribution plan.

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CRS-11
Retirement Account Balances by Age of Household Head. An
individual’s age is an important consideration when evaluating the adequacy of his
or her retirement savings. The more time that a person has until reaching retirement,
the greater the opportunity to make additional contributions and for investment
earnings to build up his or her retirement account balance. Table 5 shows rates of
retirement account ownership and average retirement account balances, categorized
by the age of the household head.
Between 2001 and 2004, the percentage of households that owned a retirement
account of any kind fell among households in which the householder was under 55
years old. Among households in which the householder was under 35 years old, the
proportion that owned a retirement account fell from 46.0% in 2001 to 40.8% in
2004. Among households in which the householder was 35 to 44 years old, the
proportion that owned a retirement account fell from 62.7% in 2001 to 56.7% in
2004. Among households in which the householder was 45 to 54 years old, the
proportion that owned a retirement account fell from 64.2% in 2001 to 58.5% in
2004. The only households in which the rate of ownership of retirement plans
increased between 2001 and 2004 were those in which the householder was 55 to 64
years old. Among this group, the proportion who owned at least one retirement
account increased from 60.2% in 2001 to 63.5% in 2004. Among households headed
by an individual age 65 or older, the proportion that owned a retirement account of
any kind fell slightly from 2001 to 2004, declining from 36.9% to 36.3%.
The changes in average retirement account balances between 2001 and 2004
differed substantially according to the age of the household head. The median
combined balance (in 2004 dollars) of all retirement accounts owned by households
in which the householder was under age 35 rose from $7,456 in 2001 to $11,000 in
2004. Among households headed by individuals between 35 and 44 years old, the
median retirement account balance actually fell between 2001 and 2004, declining
from $30,888 to $30,000. Among households headed by persons between the ages
of 45 and 54, the median combined balance of all retirement accounts grew from
$51,125 in 2001 to $60,00 in 2004. The greatest increase in median retirement
account balances between 2001 and 2004 — both in constant dollars and in
percentage terms — occurred among households in which the household head was
55 to 64 years old. Among these households, the median balance of all retirement
accounts rose from 58,580 in 2001 to $88,000 in 2004, an increase of 50%.
The increase in retirement account balances in the age group that is nearest to
retirement age is encouraging, but the median account balance of $88,000 is still not
very large. For an individual retiring at age 65 in May 2006, $88,000 could purchase
a level, single-life annuity that would pay $653 per month ($7,836 per year), based
on the federal Thrift Savings Plan’s current annuity interest rate of 5.375%. This
amount would replace just 15% of the median household income of $53,400 among
households headed by individuals who were 55 to 64 years old in 2004. Moreover,
these median values reflect only the balances of households that owned a retirement
account. When we take into account households that had no retirement account —
and thus had retirement account balances of zero — a total of 11.7 million
households headed by individuals 55 to 64 years old had retirement savings of
$88,000 or less in 2004. This represents 68.3% of all households headed by persons
who were 55 to 64 years old in 2004.

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CRS-12
Table 5. Household Retirement Account Balances, by Age of
Householder
(amounts in 2004 dollars)
Households Percent
Mean
Median
Number of
with
with
Value, all Value, all
2001
Householdsa Accountsb Accounts Accountsc Accountsc
Age of householder
Under 35 years old
24,211
11,147
46.0%
$20,144
$ 7,456
35 to 44
23,751
14,893
62.7
69,527
30,888
45 to 54
21,941
14,089
64.2
139,123
51,125
55 to 64
14,107
8,490
60.2
207,752
58,580
65 or older
22,486
8,264
36.8
155,511
53,255
All households
106,496
56,883
53.4
110,210
30,462
Households Percent
Mean
Median
Number of
with
with
value, all
value, all
2004
householdsa
accountsb
accounts accountsc
accountsc
Age of householder
Under 35 years old
24,874
10,143
40.8%
$27,098
$11,000
35 to 44
23,115
13,098
56.7
72,334
30,000
45 to 54
23,279
13,628
58.5
150,448
60,000
55 to 64
17,086
10,845
63.5
231,997
88,000
65 or older
23,755
8,617
36.3
173,552
55,000
All households
112,103
56,331
50.2
129,310
36,000
Source: CRS analysis of the Federal Reserve Board’s Survey of Consumer Finances.
Note: Includes defined contribution plan account balances from both current and past employment.
a. All households, in thousands.
b. All retirement accounts of all types, whether IRAs, Keogh accounts, or employment based plans.
c. Means and medians reflect combined balances in all types of retirement plans.
Retirement Plan Ownership and Demographic Traits. The data
presented in Table 6 show rates of ownership and average account balances for IRAs
and Keogh plans in 2004 as reported on the SCF. Table 7 shows similar statistics
for employer-sponsored defined contribution plans. The rates of ownership and
average account balances are shown in these tables in relation to the demographic
characteristics of the household head. In summary, in 2004:
! IRA ownership and average account balances rose steadily with
household income through age 65, after which they declined;
! Households whose head was white were nearly three times likely as
those in which the head was non-white to own an IRA, and their
median account balance was 2.5 times greater;
! Married couples were much more likely than unmarried individuals
to have owned an IRA, in part because these data measure retirement

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CRS-13
plan ownership at the household level, and many married couples
include two workers;
! IRA ownership rose with education, and college graduates were
more than twice as likely than those who had not graduated from
college to have owned an IRA in 2004;
! More than half of households in the top 25% of the income
distribution owned an IRA in 2004, compared to one-third of
households in the second-highest quartile, one-fifth of households
in the third quartile and just 8% of households in the bottom 25%;
! homeowners were almost four times as likely as renters to have
owned an IRA;
! IRA ownership differed little between full-time workers and part-
time workers;
! IRA ownership among employees of businesses with fewer than 20
employees differed little from that of workers at large businesses;
! Union membership appears to have little relationship to IRA
ownership.
Many of the relationships between demographic characteristics and 401(k)
participation were similar to the relationships between demographic characteristics
and IRA ownership, but there were some differences. For example, while IRA
ownership increased with each age up to 65, 401(k) ownership dropped in the 55-to-
64 age category. This could be attributable in part to the large number of people who
roll over 401(k) account balances into an IRA when they retire, and also to the fact
that older workers are more likely to be employed at firms that still offer defined
benefit pension plans. While 401(k) ownership was greater among households
headed by a white individual than a non-white individual, the difference was not as
great as the difference in the rate of IRA ownership by race. Likewise, while 401(k)
ownership was greater among couples than singles, the difference was not as great
as the difference in the rate of IRA ownership by marital status. Full-time workers
were 2.5 times as likely as part-time workers to have owned a defined contribution
retirement plan in 2004. Finally, while IRA ownership differed little among
employees of small firms and large firms, 401(k) ownership was substantially higher
among workers at businesses with more than 500 employees than among workers at
businesses with fewer than 20 employees. In 2004, 58% of workers at the largest
firms owned a defined contribution plan, compared to 24% of workers at small firms.

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CRS-14
Table 6. Household Ownership of Individual Retirement
Accounts and Keogh Accounts in 2004
Percent that Mean balance
Median
Own an IRA
in all
Balance in all
Household head
Number of
or Keogh
IRA/Keogh
IRA/Keogh
Characteristics
Householdsa
Planb
Plans
Plans
Age
Under 35
24,874
16.0%
$17,641
$8,000
35 to 44
23,115
25.2
52,506
20,000
45 to 54
23,279
33.6
91,050
35,000
55 to 64
17,086
43.9
142,544
60,000
65 or older
23,755
31.4
164,703
48,000
Race
White, non-Hispanic
80,511
35.7
110,971
32,500
Black, Hispanic, or Asian
31,598
12.2
51,250
13,000
Sex and Marital Status
Married
56,973
38.6
126,469
40,000
Single Male
24,170
21.6
70,414
20,000
Single Female
30,966
17.2
43,336
14,000
Education
College graduate
41,038
47.0
136,066
43,000
Some college
20,590
22.9
69,619
19,000
High School graduate
34,300
22.0
53,438
17,500
Did not graduate High School
16,181
6.4
28,713
12,200
Household income in 2003
Top income quartile
27,525
54.3
159,264
60,000
Second income quartile
27,692
34.6
63,532
21,500
Third income quartile
28,568
20.6
48,205
17,000
Bottom income quartile
28,324
7.7
51,934
11,200
Own or rent home
Own
77,414
37.8
110,747
33,000
Rent
34,695
9.6
43,954
12,000
Full-time or part-time worker
Not in the labor force
26,732
24.3
139,093
40,000
Full-time
71,470
30.2
87,736
26,000
Part-time
13,907
32.2
130,802
42,000
Establishment size
Not in the labor force
26,732
24.3
139,093
40,000
Under 20 employees
25,076
30.0
121,170
35,200
20 to 99 employees
13,472
24.9
74,803
20,000
100 to 499 employees
12,939
29.2
78,762
25,700
500 or more employees
33,980
33.6
89,347
25,000
Union status
Not in the labor force
26,732
24.3
139,093
40,000
Union
12,868
29.0
50,017
16,000
Non-union
72,509
30.8
102,663
30,000
Total
112,109
29.0% $103,893
$30,000
Source: CRS analysis of the Federal Reserve Board’s 2004 Survey of Consumer Finances.
a. All households, in thousands.
b. Percentage of households in which head or spouse participated in plan, by type of plan.

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CRS-15
Table 7. Household Ownership of Defined Contribution Plans
from Current or Past Job in 2004
Percent that
Own one or
Mean Balance
Median
Household head
Number of
more DC
in all DC
Balance in all
Characteristics
Householdsa
Plansb
Plans
DC Plans
Age
Under 25
24,874
34.1%
$24,124
$ 9,900
35 to 44
23,115
45.5
60,632
27,000
45 to 54
23,279
44.7
127,107
50,000
55 to 64
17,086
41.7
202,425
61,000
65 or older
23,755
9.4
119,300
30,000
Race
White, non-Hispanic
80,511
37.6
111,605
31,000
Black, Hispanic, or Asian
31,598
26.8
58,122
17,000
Sex and Marital Status
Married
56,973
43.5
126,034
40,000
Single Male
24,170
31.2
68,737
15,000
Single Female
30,966
20.9
36,298
13,000
Education
College graduate
41,038
48.0
142,211
45,000
Some college
20,590
34.4
68,201
18,000
High School graduate
34,300
29.5
52,847
18,100
Did not graduate High School
16,181
11.5
29,046
12,000
Household income in 2003
Top income quartile
27,525
62.1
176,109
74,200
Second income quartile
27,692
45.7
52,712
20,000
Third income quartile
28,568
25.4
22,281
9,900
Bottom income quartile
28,324
6.2
18,864
2,000
Own or rent home
Own
77,414
41.0
115,625
35,000
Rent
34,695
20.2
28,753
9,200
Full-time or part-time worker
Not in the labor force
26,732
5.3
106,939
40,000
Full-time
71,470
48.5
97,607
27,000
Part-time
13,907
19.1
126,531
38,000
Establishment size
Not in the labor force
26,732
5.3
106,939
40,000
Under 20 employees
25,076
23.6
92,840
22,900
20 to 99 employees
13,472
39.5
58,048
14,000
100 to 499 employees
12,939
50.9
86,894
29,000
500 or more employees
33,980
57.5
117,386
34,000
Union status
Not in the labor force
26,732
5.3
106,939
40,000
Union
12,868
51.6
84,467
32,000
Non-union
72,509
42.4
102,952
27,000
Total
112,109
34.6% $99,933

$28,000
Source: CRS analysis of the Federal Reserve Board’s 2004 Survey of Consumer Finances.
a. All households, in thousands.
b. Percentage of households in which head or spouse participated in plan, by type of plan.

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CRS-16
Household Net Worth. Most households have wealth other than retirement
accounts on which they will be able to draw during retirement. More than 96% of
workers in the United States are covered by Social Security, and about one-fifth of
workers participated in defined-benefit pension plans in 2004. In addition, many
workers have other assets that could be used to pay expenses during retirement. For
example, the most valuable asset owned by many people is their home, and some
may find when they are older that they prefer to live in a smaller house or apartment,
or they may choose to move to an area where property taxes and other living
expenses are lower than where they lived during their working years. In addition to
equity in their homes, many individuals have financial assets, equity in businesses,
real estate, or other valuables that can either provide a stream of income through
interest, dividends, or rents, or that can be fully or partially liquidated to finance their
consumption needs during retirement. The broadest measure of net household wealth
— the difference between total assets and total liabilities — is called “net worth.”
The median net worth of all households in the United States in 2001 and 2004,
categorized by the age of the household head, is shown in Table 8.
Table 8. Median Household Net Worth in 2001 and 2004,
by Age of Household Head
(amounts in 2004 dollars)
Age of Household Head
Median Net Worth
Percent Change
2001
2004
Under 35 years old
$12,300
$14,200
15.4%
35 to 44
82,600
69,400
-16.0
45 to 54
141,600
144,700
2.2
55 to 64
193,300
248,700
28.7
65 to 74
187,800
190,100
1.2
75 or older
161,200
163,100
1.2
All households
91,700
93,100
1.5
Source: Bucks, Kennickell, and Moore, Federal Reserve Bulletin, 2006.
Between 2001 and 2004, median net worth among all U.S. households (in 2004
dollars) rose by just 1.5%, increasing from $91,700 to $93,100. Changes in median
net worth between 2001 and 2004 differed substantially by the age of the household
head. Net worth rose by 15.4% among households headed by persons under age 35,
although this increase amounted to just $1,900 because the net worth of these
younger households was quite low to begin with. Among households headed by
individuals between 35 and 44 years old, net worth declined by 16% between 2001
and 2004, falling from $82,600 to $69,400. There was a small (2.2%) increase in the
net worth of households headed by persons between the ages of 45 and 54. The
greatest increase in net worth between 2001 and 2004 occurred in households headed
by persons aged 55 to 64. Among these households, net worth rose from $193,300
to $248,700, an increase of nearly 29%. Households headed by persons 65 or older
experienced a very small increase in net worth of 1.2% between 2001 and 2004.

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CRS-17
Conclusion
Are Americans saving adequately for retirement? The median retirement
account balances reported on the 2004 Survey of Consumer Finances would not by
themselves provide an income in retirement that most people in the United States
would find adequate. Among the 10.8 million households headed by persons aged
55 to 64 in 2004 and that owned at least one retirement account, the median balance
of all their accounts was $88,000. Moreover, an estimated 6.2 million households
headed by persons 55 to 64 years old had no retirement savings accounts in 2004.
Including the households with zero balances, a total of 11.7 million households
headed by persons age 55 to 64 — 68% of all households in this age group — had
retirement account balances of $88,000 or less in 2004. Among the 79.6 million
households that included at least one worker under age 65 in 2004, 33.3 million —
or 42% — did not own a retirement savings account of any kind. The median
balance among the worker-households that owned an account was just $35,000.
For workers who are not included in a defined-benefit pension where they are
employed — which is about 80% of all workers — saving from current income is
essential to preparing for retirement. Whether workers save by putting money into
accounts that are earmarked for retirement or by accumulating other assets on which
they can draw after they have retired is not necessarily important. The act of saving
is of greater consequence to retirement security than the manner in which it is
accomplished. Nevertheless, the fact that 33 million households that included a
worker under age 65 had no retirement savings accounts in 2004 indicates that many
households are not taking advantage of the tax deferrals available to virtually all
workers through IRAs and to many workers through employer-sponsored plans.
On the one hand, the widespread adoption of tax-favored retirement savings
plans over the past 25 years indicates that many workers are taking seriously their
responsibility to save for retirement. On the other hand, the balances in these
accounts — even among those who are near retirement — are generally low. For
example, if the median retirement account balance of $88,000 among households
headed by persons 55 to 64 years old in 2004 were converted to an annuity, it would
provide a monthly income of $653 per month ($7,836) to a person retiring at age 65.
This amount would replace just 15% of the median income of households headed by
individuals who were 55 to 64 years old in 2004.5
The uncertain future of Social Security and the declining prevalence of defined-
benefit pensions that provide a guaranteed lifelong income have put much of the
responsibility for preparing for retirement directly on workers. The low rate of
personal saving in the United States and the lack of any retirement savings accounts
among millions of American households indicate that there is a need for greater
awareness among the public about the importance of setting aside funds to prepare
for life after they have stopped working. Most workers in the United States will need
to begin saving more of their income if they wish to maintain a standard of living in
retirement comparable to that which they enjoyed while working. The alternatives
would be to work longer or to greatly reduce their standard of living in retirement.
5 The median income of households headed by persons aged 55 to 64 in 2004 was $53,400.

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CRS-18
References
Brian K. Bucks, Arthur B. Kennickell, and Kevin B. Moore. “Recent Changes in
U.S. Family Finances: Evidence from the 2001 and 2004 Survey of Consumer
Finances.” The Federal Reserve Bulletin, 2006.
[http://www.federalreserve.gov/pubs/bulletin/2006/financesurvey.pdf]

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