Distressing news from Alicia Munnell and crew at the Center for Retirement Research at Boston College.
Citing the Federal Reserve’s 2016 Survey of Consumer Finances as “an opportunity to examine households’ holdings in 401ks and IRAs,” CRR notes that, “for working households nearing retirement with a 401k, median combined 401k/IRA balances rose from $111,000 in 2013 to $135,000 in 2016.”
It might seem like a positive but no.
“While growing balances are encouraging, $135,000 provides only $600 per month in retirement, so current saving levels are still falling short,” the academics calculate. “Moreover, about half of households nearing retirement have no 401k assets at all, so lack of access to a plan remains an enormous problem.”
The 401k system, they conclude, has evolved over time “into a collection mechanism for retirement saving; the bulk of the money now resides in IRAs,” something that follows on earlier CRR research.
However, the Investment Company Institute recently reported steady and strong increases in total U.S. retirement assets, clocking in at $26.6 trillion as of June 30, up 1.9 percent from March, accounting for 34 percent of all household financial assets in the United States.
IRA assets totaled $8.4 trillion, an increase of 2.3 percent, and defined contribution plan assets rose 2.2 percent to $7.5 trillion.
Government defined benefit plans held $5.7 trillion in assets, a 1.5 percent increase from the end of March.
Private-sector DB plans held $3 trillion in assets at the end of the second quarter, and annuity reserves outside of retirement accounts were $2.1 trillion.
Specific to defined contribution plans, Americans held $7.5 trillion in all employer-based DC retirement, of which $5.1 trillion was held in 401k plans.
In addition to 401k plans, at the end of the second quarter, $575 billion was held in other private-sector DC plans, $949 billion in 403b plans, $297 billion in 457 plans, and $526 billion in the Federal Employees Retirement System’s Thrift Savings Plan.
Mutual funds managed $3.3 trillion, or 65 percent, of assets held in 401k plans.
With nearly $2 trillion, equity funds were the most common type of funds held in 401k plans, followed by $918 billion in hybrid funds, which include target date funds.