Concerns about whether enough Americans have access to retirement savings plans regularly drive alarmist headlines and heated Capitol Hill hearings, but two recent studies indicate that workers’ access to such plans is, in fact, widespread.
For U.S. workers most likely to be able to save and to be focused on preparing financially for retirement, coverage by an employer-provided retirement plan is common. A study by the Investment Company Institute, ”Who Gets Retirement Plans and Why, 2011” released in September of this year, found that nearly three-quarters of those likely to save for retirement in the current year had access to a retirement plan through their own or their spouse’s employer. Of that group, 93 percent participated.
Broadly, the report said that 50 percent of private-sector wage and salary workers aged 21 to 64 reported that their employers sponsored retirement plans; however, this access is not distributed randomly across the workforce.
Access Levels Vary by Worker Characteristics
Another recent government study found that nearly two-thirds of U.S. private-industry workers had access to either a defined benefit or defined contribution retirement plan, but that access levels varied noticeably by the workers’ characteristics. The report, in the September 2012 edition of “Beyond the Numbers,” a U.S. Bureau of Labor Statistics’ monthly publication, said access to retirement plans differed significantly by occupation, union status and wage level, among other characteristics.
Among the primary factors that give rise to a worker’s focus on saving for retirement in the current year is being a full-time, permanent employee aged 30 or older earning at least $25,750 a year, among other factors, according to ICI. People fitting this description are closer to retirement and have enough income and certainty about the ongoing nature of their jobs to place a priority on saving, the study said. They also are drawn to work for a company that offers a retirement plan, if they fit this profile, the report said. Younger workers tend to save for other reasons: to fund education, to buy a house or to have cash on hand for unexpected expenses. Low-income workers often cannot spare the money to put into a retirement fund.
What Sets Off Retirement Readiness Fears
The figure that often sets off alarm bells about U.S. retirement readiness — for 2011, 78.7 million people without access to their own work-based retirement plan — includes 61.1 million private-sector wage and salary workers. But 12.7 million people in this uncovered group were self-employed and 153,000 reported they worked without compensation of any type.
Yet the ICI study maintains that a significant proportion of those reporting they do not have access to an employer-sponsored plan are not likely to save for retirement right now, anyway. For example, 41 percent of the 52 million workers without access to an employer-sponsored retirement plan are part-time or seasonal workers. A further 7.4 million in the uncovered group were aged 21 to 29, a group not predisposed to saving for retirement. And among the full-time workers indicating their employer does not offer a retirement plan, about 15 percent earn less than $50,000 per year, another group that has less ability to save and may be relying more on Social Security income upon retirement.
Critical to the argument that retirement plan access is sufficient for most is the idea that the percentage of workers at companies that sponsor retirement plans underestimates the overall access of individuals to employer-sponsored retirement plans. This view emphasizes those who save through their spouse’s retirement plan. For 2011, of the 52 million people who worked for companies that did not sponsor retirement plans, just 9.9 million, or 19 percent, did not have access to a plan through a spouse, the ICI study said.