A bull market and a greater awareness of the need for solid retirement savings combined to push total U.S. -based retirement assets to $25.3 trillion in 2016, an increase of 6 percent for the year.
The Investment Company Institute also found that retirement assets accounted for 34 percent of all household financial assets in the United States at the end of 2016.
Specific to 401k and similar plans, Americans held $7 trillion in employer-based DC retirement plans, of which $4.8 trillion was held in 401ks.
Assets in individual retirement accounts totaled $7.9 trillion, an increase of 1.1 percent from the end of the third quarter.
By comparison, their defined benefit counterparts in government—including federal, state, and local government plans—held $5.5 trillion in assets as of the end of December, a 2.4 percent increase from the end of September.
Private-sector defined benefit plans held $2.9 trillion in assets at the end of the fourth quarter of 2016, and annuity reserves outside of retirement accounts accounted for another $2.0 trillion.
Defined Contribution Plans
In addition to 401k plans, at the end of the fourth quarter, $550 billion was held in other private-sector DC plans, $905 billion in 403b plans, $282 billion in 457 plans, and $467 billion in the Federal Employees Retirement System’s Thrift Savings Plan (TSP).
Mutual funds managed $3 trillion, or 63 percent, of assets held in 401(k) plans at the end of December 2016. With $1.8 trillion, equity funds were the most common type of funds held in 401(k) plans, followed by $835 billion in hybrid funds, which include target date funds.
Target Date Funds
Target date mutual fund assets totaled $887 billion, up 1.5 percent in the fourth quarter and up 16.3 percent for the year.
Retirement accounts held the bulk of target date mutual fund assets: 88 percent of target date mutual fund assets were held through DC plans (67 percent of the total) and IRAs (20 percent) at year-end 2016.
Individual Retirement Accounts
IRAs held $7.9 trillion in assets at the end of the fourth quarter of 2016, up 1.1 percent from the end of the third quarter. Forty-seven percent of IRA assets, or $3.7 trillion, was invested in mutual funds, predominately in equity funds ($2 trillion).
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
