Are Rural Americans left behind in the employer-based retirement savings system?

By Sarah Eckhardt and Jiaxin He

The “retirement crisis” is back on the national agenda.

Retirement savings are one of the primary ways that Americans build wealth and financial security, backed by hundreds of billions of dollars in federal tax subsidies each year. The U.S. retirement system has nevertheless long been defined by large gaps in who has access to benefits and incentives.

BlackRock CEO Larry Fink recently made news by highlighting the wide disparities between the benefits offered to Fortune 500 employees and the rest of the workforce, saying that expanding retirement access should be a “national priority.”^[1] Indeed, several other types of access gaps are well established throughout the retirement system. Low-income earners, racial and ethnic minorities, and workers without college degrees, for example, are all less likely to be offered a retirement savings plan by their employer.

Disparities between rural and non-rural workers, however, remain largely overlooked.

In this analysis, we use data from the Survey of Income and Program Participation (SIPP) published by the Census Bureau^[2] to assess whether rural workers represent yet another group that has been left behind by the retirement system in the United States.

Our key findings include: 

• Half of rural adults working full-time in the private sector don’t have access to a workplace retirement plan.

• On average, rural workers hold approximately half the retirement savings of their urban counterparts, resulting in a gap of nearly $55,000.^[3]

• Moving to a rural area means fewer benefits. A typical worker who relocates to a rural area would be 13 percentage points less likely to have a retirement plan.

• Income levels narrow the gap, but socioeconomic disparities persist. Among high-income workers, the difference in retirement plan access between rural and urban areas is small. However, large gaps remain across age groups and education levels.

Our methodology: defining rural

For this analysis, we focus on full-time, working-age, private sector workers. We exclude part-time and volunteer workers, who are often ineligible for retirement plans. Government employees are also excluded, as they do not rely on retirement plans provided by private firms. Finally, we define working-age as 18 through 65, and thus exclude workers who are younger and older than this range. 

As a proxy for urban versus rural, we use SIPP’s variable for metropolitan versus non-metropolitan areas.^[4]

The data shows that 50 percent of Americans living in rural areas lack access to any retirement savings plan through their employer, compared to 41 percent in urban areas. An even higher share, 57 percent, lack savings plans with matching contributions from their employer, compared to 50 percent of urban workers.^[5]

In absolute numbers, 5.1 million rural workers are without access to an employer-based retirement plan, and 5.9 million do not receive employer matching.^[6] If these gaps did not exist — that is, if rural workers had the same access rates as urban workers — nearly a million more rural workers would have access to a retirement plan.

These gaps persist for the amount of retirement savings, too. On average, rural workers have 44.7 percent less in their retirement accounts than the national average of $107,057 and roughly half of the urban worker’s average of $113,752. The contrast is stark even considering the difference in cost of living.^[7]

Probing deeper

Demonstrating that rural workers suffer from a retirement access gap doesn’t explain how much of that gap is predicted by living in a rural area. The gap could be the result of other socioeconomic factors that rural workers just happen to be more likely to possess. 

Consider the following:

1. Workers with higher incomes have better retirement plan benefits: 74.9 percent of workers in the lowest income decile lack access to a retirement plan, while only 17.3 percent of those in the highest income decile do.^[8]
   
2. Older workers receive more in benefits than younger workers: Only 40 percent of workers aged 18–29 have access to a retirement plan, compared to 63 percent of those 30–54, and 66 percent of workers 55–65.
   
3. Higher-educated people have better access to retirement savings plans: 74 percent of workers with at least a bachelor’s degree are offered a retirement plan through their employer, while 39 percent of those with a high school diploma or lower are offered a plan.
   
4. Some industries offer better retirement benefits than others: At the high end, 76 percent of workers in the Finance, Insurance, and Real Estate industry are offered an employer-based retirement plan. At the low end, only 22 percent of workers in the Arts, Entertainment, Recreation, and Accommodation and Food Services industry, have access.
   
5. Large firms have the resources to offer more employee benefits: 73 percent of employees who work for an employer with more than 1,000 workers are offered a retirement plan, while only 45 percent of employees who work for employers with fewer than 10 workers have access.

Rural workers are typically older than those living in urban areas, have lower incomes and education levels, are employed by smaller companies, and work in industries that offer fewer retirement benefits. It is conceivable that the combination of these characteristics — rather than the fact of living in a rural area itself — might explain the bulk of the retirement access gap between Americans in urban and rural areas. We need to empirically test how much each of these variables matters.

Put another way, to understand the extent to which there is a true urban-rural retirement plan gap, we need to disentangle which of these socioeconomic characteristics are the most important. Is an upstate New York worker, for example, more likely to be offered a 401(k) plan if they move to Manhattan (the geographic gap) or if they pursue a degree from a local community college (the education gap)?

To address this question, we employ a statistical technique called a random forest. This method uses the set of relevant characteristics — urban-rural status, age, education, income, industry, and employer size — to predict whether an individual has access to an employer-based retirement plan. This approach allows us the flexibility of assessing the impact of any specific combination of characteristics on the likelihood that a worker has access to a retirement plan — and then compare how these effects differ between urban and rural workers.  

Overall, we find a significant urban-rural gap in whether a worker has access to an employer-based retirement plan. The median worker who lives in an urban area has a 67 percent probability of having access. A worker who shares all of the same characteristics but lives in a rural area has a 54 percent probability of access — a 13 percentage point gap. 

Random forests are particularly useful because they can show how the urban-rural retirement gap varies across different types of workers. For example, while a high level of education gives you more retirement access no matter where you live, we can see that it does not close the urban-rural retirement access gap. Both rural workers with a high school diploma or less, and those with a bachelor’s degree or more, face a roughly 12 percentage point gap compared to their similarly educated urban peers.

While older workers unsurprisingly have better access to retirement plans, the urban-rural access gaps are similar for workers of all ages. Retirement access for 24-year-olds in rural areas is 16 percentage points lower than that of urban workers of the same age. For 60-year-old workers, the urban-rural access gap is 14 percentage points. Older workers not only enjoy greater access to retirement plans regardless of urbanicity but also have a 2 percentage point smaller urban-rural access gap.

Moving down the table, other factors like income and employer characteristics do help to explain some but not all of the urban-rural retirement gap. Higher income is clearly associated with greater access, and for the highest-income people, there is no urban-rural access gap. In contrast, while low-income workers have poor access wherever they live, those in rural areas are worse off than those in urban areas.

The industry and size of one’s employer also has a substantial impact on their level of access. Being in an industry with low retirement plan access is unsurprisingly associated with lacking access to a retirement plan regardless of where one works. On the other hand, working for a large firm is associated with both better access, no matter the location, and a reduction in the urban-rural access gap by 2 percentage points.

Together, these calculations demonstrate that living in a rural area is generally associated with having restricted access to retirement savings plans for many different kinds of workers. The effect is more acutely felt by young people, low-income workers, and employees at small firms.

Closing the gap

The access gap between rural America and the rest of the country is consistent with other trends. People in rural areas already have less access to high-paying jobs, banks, and credit.^[9] What can lawmakers do to close this gap for rural workers and others being left out of the private retirement system?

A bipartisan group of lawmakers have proposed a solution in the form of the Retirement Savings for Americans Act (RSAA). The bill would establish a new program called the American Worker Retirement Plan that makes workers who currently lack access to a workplace retirement account eligible for tax-advantaged retirement savings accounts modeled after the federal government’s Thrift Savings Plan.

These new retirement plans would be portable, meaning that workers can take their accounts with them as they switch between jobs — making them the property of workers rather than employers — and allow workers to pause or increase contributions as needed. The plan also would provide a matching tax credit for low-income workers, which would help increase participation in retirement savings plans.

While this legislation would benefit workers everywhere, our findings suggest that the access and incentives provided by RSAA would disproportionately benefit rural workers.  

Appendix

The following provides an alternative way to view the random forest model results. This approach offers a more nuanced perspective on how retirement access changes across different combinations of a worker’s characteristics. Starting from the median worker in the upper left cell, we can move across columns and down rows to see how changes in select characteristics impact the probability that a person has access to a retirement plan. The overall urban-rural gap is seen by comparing the first and second rows.

Notes

1. https://fortune.com/2025/03/14/larry-fink-retirement-planning-fortune-500[↩]
2. The SIPP is one of the main resources of data on workers’ access to and participation in retirement savings programs, and most accurately identifies these rates compared to other options. See our prior post breaking down retirement data sources here.[↩]
3. The Survey of Consumer Finances (SCF) is typically used in academic literature to estimate the dollar value of workers’ retirement savings accounts. However, the SCF does not publish information on whether respondents live in urban or rural areas. Research has found that the SCF captures nearly 100 percent of retirement income from administrative data, while the SIPP captures 93 percent. We found that the SCF’s mean retirement savings value is $99,466, compared to $107,057 in the SIPP. This statistical discrepancy is small relative to the observed large urban-rural retirement savings gap in the SIPP, so we are confident in relying on it for our study.[↩]
4. SIPP, the data used in this analysis, does not categorize workers by ‘urban’ or ‘rural’ status. Instead, it uses metropolitan or non-metropolitan status. As most non-metropolitan counties are rural, we use metro versus non-metro as a proxy for urban versus rural. Of the 1,958 counties classified as non-metro by the OBM, 88% are classified as being rural according to EIG’s classification (link). The remaining 12% are small towns. Without knowing which metropolitan area or non-metropolitan area SIPP respondents live in, this provides strong support for using non-metro as a proxy for rural. See our github page for further explanation (link).[↩]
5. The 57 percent of rural workers without access to a plan with an employer match includes the 50.4 percent who don’t have access to any kind of plan and roughly another 6.2 percent who do have a plan but not an employer match.[↩]
6. These labor force figures are based on the CPS’s estimate of the workers between ages 18-65 working full-time for non-government employers, who earn non-zero incomes. Estimates are split out by urban-rural geographies, and are applied to the rates of access, participation, and matching. We use the CPS as it provides a more accurate estimate on the U.S. labor force size.[↩]
7. According to Regional Price Parities published by the Bureau of Economic Analysis, non-metropolitan areas are 11.8 percent cheaper compared to the national average, much smaller than the 44.7 percent gap between the retirement savings of non-metro workers and the national average.[↩]
8. See our earlier post breaking out employer-based retirement savings by income: https://eig.org/whos-left-out-of-americas-retirement-savings-system[↩]
9. See for example Su, Yipeng and Morgan, Anna “Promoting Rural Financial Well-Being and Inclusion”, Urban, May 2024 (link).[↩]