When considering employee well-being — as well as workforce planning — employers often wonder whether employees have adequate savings for retirement. While the assessment needs to be holistic, employers generally have no way of knowing about retirement savings and benefits workers have accumulated in previous jobs or from other sources.
Based on comprehensive household survey data, we estimate that about 45% of workers have retirement savings outside of their current employers. On average, such savings account for more than half of these workers’ total retirement savings (55%).
This analysis is based on the 2010 Survey of Consumer Finances. Conducted by the Federal Reserve Board, this triennial survey gathers detailed information about the income, savings, benefits, investments and demographic characteristics of a representative sample of U.S. households. We focus on 30- to 60-year-olds currently working for companies with more than 100 employees. At these ages, workers are most likely to have accumulated retirement savings but not to have transitioned into retirement. Savings are tabulated from current employer plans versus from other sources.
Other sources include the following:
- Workers’ individual retirement accounts (IRAs)/Keoghs (including regular and Roth, rollovers and inherited accounts)
- Pensions from previous jobs (their own or those of their spouse/partner)
- Pensions belonging to a spouse or partner
- Pensions belonging to former spouses and/or family members to which they have some right
Social Security benefits, nearly universal, are not considered here because they are easy for the current employer to take into account.
Retirement savings vary widely among workers in 2010 (Figure 1). The median accumulation is $79,300 and the average is $187,100, with a significant number of workers having minimal savings and a few being quite wealthy. Roughly 70% of workers have a defined contribution (DC) plan at their current job, and about 33% have a defined benefit (DB) plan. Among survey participants, DB plan benefits (present values) tend to be more valuable than DC account balances: median $164,200 for DB versus $33,000 for DC.
Figure 1. Composition of retirement savings among workers ages 30 to 60, 2010
Source: Estimates are from the 2010 Survey of Consumer Finances. Observations are weighted to be consistent with the national population. The sample holds 9,387 workers, including imputations by the Federal Reserve.
About 40% of workers have DC-type savings and about 9% have DB-type assets from other sources, according to the statistics. Their median values are $25,000 and $55,100, accounting for roughly 41% and 64% of the workers’ total savings, respectively.
For most workers, the retirement plans sponsored by their current employer constitute their primary savings vehicles for retirement (Figure 2). Nevertheless, other sources of pensions and benefits are substantial, so omitting them underestimates the savings preparedness of 45% of workers — and the bias could be considerable, ranging from 0% to 100% of total savings.
Figure 2. Composition of retirement savings by tenure and age, 2010
Source: Estimates are from the 2010 Survey of Consumer Finances, which includes both DB and DC savings. Observations are weighted to be consistent with the national population.
The percentage of workers with outside savings is 56% among those ages 51 through 60 versus 34% among those 30 to 40, probably because older workers are more likely to have had multiple jobs. The median amount of such savings is also bigger among older workers: $49,000 for the older group versus $30,000 for the younger group.
Obviously, workers whose tenure is a year or less tend to have a smaller share of their savings in their current-job plans. But these plans will loom large as accruals, contributions and investment returns accumulate over time. Some workers consolidate their various retirement accounts, while others maintain significant savings outside of their current job (accounting for 19%, median, of total savings among workers with tenures of 10-plus years, or 36% on average).
This brief analysis shows workers’ retirement savings, both in plans sponsored by their current employers and from other sources, such as their spouses’ plans. Many workers have amassed substantial savings outside of their current employer’s plans, suggesting that workers’ retirement prospects might be brighter than it appears from their current-job savings.
As a cautionary note, the analysis does not consider whether workers’ accumulations — both in their employer’s plans and outside them — constitute adequate retirement savings. That assessment would be a different subject, duly considering household demographics and economic situations.