After a sharp increase in the number of plans and the number of participants during the 1990s, growth has slowed in recent years for 401(k) plans, says the Employee Benefit Research Institute (EBRI). The EBRI study also looked at asset growth in individual retirement accounts (IRAs). Assets have grown in both IRAs and 401(k)s, according to the study. The asset growth in IRAs, though, is likely due to rollovers from other tax-qualified retirement plans.
Most IRA contributions are going into non-deductible Roth accounts, the study reports. "IRAs and defined contribution plans held $7.5 trillion in assets at the end of the year 2006," said Craig Copeland, EBRI senior research associate and author of the May Notes study. "Although Americans have amassed a substantial amount of total wealth in these plans, the data also shows that a majority of Americans still do not have a retirement plan."
In 1985, says EBRI, there were 29,869 401(k)-type plans in the private sector, with 10.3 million active participants with $144 billion in assets. By 2005, the number of plans had reached 436,207. Participants in these private sector 401(k)-type plans had grown to 44.4 million by 2004. Invested assets increased sharply from 1985 2004, even considering the market volatility of the last part of the 20th century. By 1999, assets held in 401(k)-type plans amounted to $1.79 trillion. With the decline of the stock market, assets dropped to $1.57 trillion by 2002, then increased to $2.4 trillion in 2005.
While the percentage of workers contributing to a 401(k) or similar plan rose in the 21-64 age range, the numbers are not impressive. In 1996, 24.1% of those workers participated in a plan; by 2005, the number was 33.1%. Those contributing the maximum dollar amount allowed by the IRS remains small: 3.2% contributed at the maximum level in 1996, and the figure rose to just 8.9% in 2005.