401(k) Assets Inch Closer to Major Milestone

retirement, 401k, saving, investing

Thankfully, the jars are beginning to fill.

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).

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