The Retirement Savings Crisis and the Role of ESOPs

In the last 50 years American workers have been experiencing an erosion in their ability to adequately save and plan for retirement.

According to the National Retirement Risk Index, half of U.S. households will not be able to maintain their standard of living when they retire even if they were to work up until age 65 and annuitize all financial assets.¹

In the data below we will document the current retirement savings situation and present evidence of the potential of ESOPs as one way to help address it.

The most recent data from the Survey of Consumer Finances (SCF) on account holdings show that 46% of Americans have no retirement savings.³

The US Bureau of Labor Statistics reports that only 53% of private industry workers participated in any sort of plan that provides retirement benefits.⁴

Access to retirement plans is strongly correlated to wages.

According to the SCF just 27% of working age adults are or have been in a defined benefit plan and are eligible to receive those benefits; 44% report a balance in a 401(k), and 27% report a balance in an IRA. There is overlap in these categories.

Left out of this equation are the 43% of working age adults who have no retirement savings at all (40.3 million Americans—see figure 1 above).

Table 1 breaks out these adults by age groups. Since half of the group have no retirement savings, the median reported account balance is just $5,000 and zero for the youngest group.

Table 2 breaks out working age adults by wage groups and demonstrates the strong correlation between savings and wages.

Figures 3 and 4 below demonstrate the difference in the picture comparing data reporting the balances of all Americans (figure 3) versus data that just includes those that have at least some savings (figure 4). The large gap between the means and medians below reflects the uneven distributions of account balances. Individuals with very large account balances increase the means, while the median represents the middle (50% have more savings and 50% have less).

Both mean and median retirement savings reflect an income advantage.

Since the 1980s, private pension benefits have slowly eroded as employers have shifted from traditional defined benefit (DB) plans that generally provide set monthly payments for life, to defined contribution (DC) account-based plans, like 401(k) plans that leave retired workers increasingly responsible for covering the costs of economic security in retirement.⁶

DC plans can provide meaningful retirement security for many, especially higher earners, while lower earners appear more prone to having little or no savings in their DC accounts.⁷

The trend of stagnating wages can make it increasingly difficult for many individuals to save for retirement.

Union members are much more likely to have traditional pensions. These same trends saw a decrease in unionization from 20.1% in 1983 to 10.0% as of 2023.⁹

ESOPs by their very structure are positioned to address the related issues of wealth inequality and retirement security. It is a type of defined contribution retirement plan governed by ERISA. An ESOP by law must be broad-based and must include all workers who meet federally determined, non-discriminatory criteria. See our ESOP Nuts and Bolts for a simple explanation.

ESOPs tend to create wealth for a broader set of employees than 401(k) plans because they generally do not require employee contributions to the plans, allowing more people to participate–especially those unable to afford deferrals from their paychecks. ESOPs also tend to serve two purposes–to be an employee benefit and to facilitate a transfer of ownership–which results in them have a larger annual company contribution than 401(k) plans.

Currently there are 6,533 ESOPs in the US, covering 10.7 million participants. ESOPs hold total assets of over $2.1 trillion and paid out over $175 billion dollars to participants. See our Employee Ownership by the Numbers for counts and statistics on all ESOPs in the US.

There is a strong body of research showing the benefits to business owners, companies, and communities when these companies become ESOP-owned. See our summary of all the research findings.

In terms of retirement security, the average ESOP account balance was found to be more than double the average account balance at a comparable conventional firm ($132,000 vs. $64,000). Further, nearly 80% of S corporation ESOPs also offer a 401(k) plan, either separate from or combined with the ESOP.¹⁰

Data published by the DOL on all qualified retirement plans allows us to filter out ESOPs and report on all of their plan characteristics. Because the data is aggregated at the company level, we are unable to use the DOL data to parse out the median account balances or look within groups of workers.

The data from Blue Ridge includes ESOP account balances from more than 265,000 workers with active ESOP accounts as of 2024, stripped of all identifying information. Blue Ridge also calculated median account balances by age and wage groups. While not designed to be comprehensive or representative, this allowed us to create a unique and large dataset of individual-level account balances. Most of these ESOP participants will also have 401(k) account balances–many of them quite large and diversified because the ESOP contributions by the company allow them to be able to do so.

For the purposes of this comparison, we focus on the 401(k) balances only of American workers. They may also have other sources of retirement savings such as IRAs.

Table 3 shows that we are able to look at large groups of active ESOP participants across age groups compared to nationally representative working Americans in those same age groups. Figure 10 illustrates the ESOP benefit across age groups.

*SCF data is weighted to reflect a nationally representative sample
**Blue Ridge active participants

Similarly, table 4 shows the breakdown we are able to do by income groups. Figure 11 shows the sizable ESOP benefit for lower and middle income workers.

* SCF data is weighted to reflect a nationally representative sample
**Blue Ridge active participants

We summarize above the current retirement savings situation of Americans. ESOPs have the potential to help Americans save for retirement.

1. Y. Yin, A. Chen, and A. Munnell, 2023 (May), The National Retirement Risk Index: Version 2.0, Boston College Center for Retirement Research, Chestnut Hill, MA. https://crr.bc.edu/the-national-retirement-risk-index-version-2-0/

2. The Pew Charitable Trusts and Econsult Solutions, 2023 (May), State and Federal Impacts of Insufficient Retirement Savings https://www.ncsl.org/labor-and-employment/state-and-federal-impacts-of-insufficient-retirement-savings

3. The Survey of Consumer Finances is a triennial cross-sectional survey of U.S. families sponsored by the Federal Reserve Board in cooperation with the Department of the Treasury conducted by the NORC at the University of Chicago. The next round of data will be available in late 2026.

4. U.S. Bureau of Labor Statistics, 2023 National Compensation Survey: Employee Benefits in the United States. https://www.bls.gov/news.release/archives/ebs2_09212023.pdf

5. NCEO analysis of SCF 2022 for all Americans, working age adults (18-64), and those currently employed (at least part-time).

6. Polivka, L., and Luo, B. (2015). The neoliberal political economy and erosion of retirement security. The Gerontologist, 55(2), 183-190. https://claudepeppercenter.fsu.edu/wp-content/uploads/2015/04/The-Neoliberal-Political-Economy-and-Erosion-of-Retirement-Security-2015.pdf

7. U.S. Government Accountability Office, 2019, The Nation's Retirement System: A Comprehensive Re-evaluation Needed to Better Promote Future Retirement Security. https://www.gao.gov/products/gao-19-342t

8. See The Forgotten Generation: Generation X Approaches Retirement by Celia Ringland Joelle Saad-Lessler Tyler Bond from the National Institute on Retirement Security, July 2023. https://www.nirsonline.org/2023/07/new-report-finds-alarming-retirement-outlook-for-generation-x-3/

9. U.S. Bureau of Labor Statistics, 2025 (January), Union Members 2024, https://www.bls.gov/news.release/pdf/union2.pdf

10. A 2021 study conducted by the NCEO with the support of Employee-Owned S Corporations of America (ESCA) compared account balances between S corporation ESOPs and comparable firms offering a 401(k) plan. https://www.nceo.org/hubfs/ESCA%20Report.final.pdf

11. The SCF data on income and retirement savings is self-reported and the Blue Ridge data on both is directly from administrative records. Since it is all workers, the SCF data includes those who report no retirement savings.