Half of American Households Have No 401(k) Assets

Older Americans saw slight increases in their average 401(k) and individual retirement account (IRA) balances over the last few years, but that cash is still woefully insufficient to fund retirement — if a household even has those resources at all.

Only half of all American households have 401(k) assets to speak of, according to a new analysis from the Center for Retirement Research at Boston College. And while the median household consisting of folks approaching retirement has a total of $135,000, the researchers claim that cash won’t help all that much.

“In dollar terms, if the median couple approaching retirement uses their $135,000 to buy a joint-and-survivor annuity, they will receive $600 per month,” the authors wrote. “Since this amount is not indexed for inflation, its purchasing power will decline over time.”


“Moreover, this $600 is likely to be the only source of additional income, because the typical household holds virtually no financial assets outside of its 401(k),” the researchers warn.

The study draws its data from the Federal Reserve’s Survey of Consumer Finances, which tracks both 401(k) balances and household IRA wealth. Between 2013 and 2016, households approaching retirement actually saw a slight bump in 401(k) and IRA assets, with the median number increasing from $111,000 to that $135,000 figure — but the researchers note those numbers aren’t adjusted for inflation, erasing some of the gains.

Younger workers, meanwhile, experienced declines in their 401(k) and IRA assets, which the researchers attribute to the increasing adoption of auto-enrollment plans; these programs assign investors low default contribution amounts — typically 3% — that workers then don’t bother changing over time, leading to a slower accumulation of money.

Even a healthy 401(k) plan, the researchers note, forces retirees to make a difficult decision: Faced with a lump-sum payout and an uncertain number of retirement years, people often find it difficult to balance savings with the ongoing costs of living.

“These risks could be eliminated through the purchase of annuities, but the individual annuity market in the United States is tiny,” the authors conclude. “Therefore, individuals are on their own, and no one really knows what they will do.”

Read the full report at the Center for Retirement Research.

Written by Alex Spanko

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  • There was little original research reflected in the article since it was a look at the Fed’s survey.

    It is hard to believe that most rollover IRAs find their source in 401(k)s. In fact employer contributions must be made to the profit sharing plan linked to the 401(k). So it seems rollover IRAs are less concentrated from 401(k)s than the authors recognized in the article.

    Unfortunately rather than focusing on the survey, the authors digress into general information about employer sponsored plans.

    Like most BCCRR “research,” it is more general information and looing into the original research of others than the original research of those writing for BCCRR.

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