Retirement assets increase to $29 trillion plus

See the key findings from two major reports on retirement assets and 401(k) plans

According to a report released by the Investment Company Institute (ICI), total US retirement assets reached $29.1 trillion as of March 31, 2019 — a 7.4% increase from December 2018. The study showed retirement assets accounted for one-third of all household financial assets in the US, with defined contribution (DC) plan assets reaching $8.2 trillion at the end of the first quarter — up 8.2% from year-end 2018. Of these DC plan assets, $5.7 trillion was held in 401(k) plans.

In addition to 401(k) plans, $535 billion was held in other private-sector DC plans, $1 trillion in 403(b) plans, $333 billion in 457 plans and $606 billion in the Federal Employees Retirement System’s Thrift Savings Plan.

Mutual funds managed $3.7 trillion — or 65%— of assets held in 401(k) plans at the end of the first quarter. With $2.2 trillion, equity funds were the most common type of funds held in 401(k) plans, followed by $1 trillion in hybrid funds, which include target date funds. Almost all of the target date fund assets (87%) came from retirement accounts.

According to the study, the largest segment of retirement assets, totaling $9.4 trillion, resided in individual retirement accounts (IRAs). A little under half of these assets (46%) was invested in mutual funds.

Another $6.3 trillion was held in government-sponsored defined benefit (DB) plans, while $3.2 trillion was in private-sector DB plans. Annuity reserves rounded out the total with $2.1 trillion in assets.

A separate study offers insight into 401(k) plan trends
A separate study by ICI and BrightScope shows that in 2016, the average large 401(k) plan offered 27 investment options, including a mix of equity funds, bond funds and target date funds. Key findings from the study include:
• Mutual fund expense ratios in 401(k) plans tended to be lower in larger plans and mirror the overall downward trend for plan fees.
• Larger 401(k) plans were also more likely to automatically enroll workers into the plan; more than half of large 401(k) plans with more than $250 million in plan assets reported that they automatically enrolled their participants, compared with fewer than 20% of plans with $10 million or less in plan assets.
• Most plans offered employer contributions. In 2016, 85% of large 401(k) plans covering more than nine out of 10 401(k) participants had employer contributions, with nearly 75% of smaller 401(k) plans in the sample having them in 2016.
• Among the 54% of large 401(k) plans with employer contributions with simple match formulas, the most common formula was matching 50% of contributions up to 6% of employee salary (with 18.8% of large 401[k] plans using this formula). The next most common simple match formula (used by 13.2% of large 401[k] plans with simple matches) was a 100% match of contributions up to 4% of employee salary.

Sources:
NAPA Net, “Retirement assets top $29 trillion, while plan fees continue downward trend,” Ted Godbout, June 27, 2019
Financial Advisor (FA), “Retirement assets recover from fourth-quarter swoon,” Christopher Robbins, June 19, 2019

Important information
Blog header: Mirko Blicke / Unsplash.com
A target date fund identifies a specific time at which investors are expected to begin making withdrawals, e.g., Now, 2020, 2030. The principal value of the fund is not guaranteed at any time, including at the target date.

Jon Vogler
Senior Analyst
Retirement Research, Invesco Consulting

Senior Analyst Jon Vogler draws on extensive pension expertise to offer retirement thought leadership for Invesco. In addition to writing Invesco’s Retirement blog, he tracks legislative and regulatory developments and contributes as a writer and editor to a variety of retirement-related Invesco communications.

Prior to joining Invesco in 2008, Jon spent more than 25 years in the research, writing, compliance and underwriting areas of the retirement services industry, including roles as a senior consultant at Mutual Benefit Life’s pension consulting firm and as a compliance manager in the Automatic Data Processing retirement services division.

Jon earned the Fellow, Life Management Institute (FLMI) and Competent Toastmaster (CTM) designations. He has a B.A. in History from Rutgers, The State University of New Jersey.

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