Assets held in employer-sponsored retirement plans increased 11.5% to reach $11.3 trillion at the close of 2014, according to Spectrem's 2015 Market Insights Report.
Individual retirement accounts (IRAs) maintain an additional
$5.4 trillion of savings, Spectrem says. According to the report, total
retirement assets across public plans, private plans and IRAs stand around
$21.5 trillion.
Other findings reveal more than $3.5 trillion in defined
benefit (DB) accounts is held by public sector workers, along with $458 billion
in defined contribution (DC) accounts and $241 billion in 457 plans. Further,
in the last five years the DB amount has grown by nearly $1 trillion, while
both the DC and 457 plans have grown by more than $100 billion.
The report reveals a near complete recovery of public sector
DB plan assets from the losses suffered in the financial crisis of 2008.
Additionally, DC plans, including the 457 plans which are employee funded, have
grown beyond pre-recession amounts.
Conversely, private sector DB assets have been slow to
recover from the 2008 financial crisis, recording $2.6 trillion in net assets
in 2014. At $8.53 trillion, DB plans account for two-thirds of the total amount
of corporate sector retirement assets. Almost three-quarters of union
retirement dollars, or $458 billion, is held in DB plans.
Spectrem’s research shows over 80% of IRA assets are held in
either mutual fund or self-directed accounts, which maintain $3.47 trillion and
$3.14 trillion, respectively. Driven primarily by rollovers from qualified
plans, IRA assets have grown at an average annual rate of 2.5% over the past
five years.
The Spectrum 2015 Market Insights Report is available for
purchase here.
Research
from TIAA-CREF finds Americans hold a variety of saving and investing
priorities that all compete for a piece of the paycheck, from short-term
savings to IRAs and 401(k)s.
The fourth annual TIAA-CREF IRA Survey finds 24% of
Americans report adding to short-term savings is their most important financial
priority when deciding how to allocate assets.
“This is three-times the number who said contributing to an
individual retirement account [IRA] is their first priority, and in parity with
the number (25%) who said they would prioritize contributing to an
employer-sponsored retirement plan, such as a 401(k) or 403(b) plan,” TIAA-CREF
researchers explain.
The research finds an “alarming number of people” don’t have
access to a 401(k) or a 403(b) plan through work—especially given just 8% of
people said they prioritize putting money into a private IRA.
“Considering these findings, it may not be surprising that a
significantly low number of respondents (only 18%) report that they are currently
contributing to an IRA,” TIAA-CREF says. “Another 14% say they have an IRA, but
they are not currently contributing anything to it.”
TIAA-CREF says the survey results point to an important
opportunity for retirement plan sponsors and advisers to impart better
knowledge about the benefits of tax-advantaged savings, whatever the form of
the account.
“Americans may be unaware of the benefits of having both an
IRA and a 401(k) or 403(b),” the researchers add. “Of respondents who said they
would not consider contributing to an IRA, 28% said they would not consider it
because they already have a 401(k) or a 403(b) and don’t need an IRA.”
TIAA-CREF warns this thinking is flawed, given the shift
away from guaranteed income through defined benefit plans and forecasts for increasingly
long lives and expensive retirements. Researchers point to the Pension Rights
Center’s recent report, published in conjunction with a U.S. Senate committee hearing,
which calculates the total U.S. retirement income deficit to
be as much as $7.7 trillion.
Further, respondents who have an IRA in addition to an
employer-sponsored retirement plan appear to be making good decisions about how
to use them, leading to increased retirement security. For example, 33% who are
currently contributors to their IRA are getting their maximum employer match
before contributing to an IRA. Additionally, 12% are maximizing contributions
to their employer plan before contributing to an IRA, up from 9% last year.
Overall, 44% of those who are currently contributing to an IRA
in addition to a 401(k) or 403(b) say they are contributing to their IRA regularly.
“That’s good news only if those individuals are first
maximizing contributions to their employer plan and receiving the maximum employer
match,” the researchers warn. “An adviser can help ensure that an individual is
allocating savings appropriately for maximum benefits.”
Doug Chittenden, executive vice president, individual business
for TIAA-CREF, says that once people know about IRAs and understand the
difference an IRA can make, they tend to take advantage of this option.
“An alarming number of people don’t have access to a 401(k)
or a 403(b) plan through work,” Chittenden adds. “But, for those who do, even
though an employer-sponsored plan and an IRA can each stand alone as an
effective retirement plan option, it’s important to consider an IRA as part of
a mix of savings choices. Among other benefits, an IRA is a great investment
option after maxing out 401(k) contributions.”
It’s important to get sound advice on how these options work
best together, Chittenden adds, and it will be important for advisers and
sponsors to track how any updated fiduciary
rule language from the Department of Labor could impact IRA rollover advice
and related education.
Other survey findings reveal a growing number of Americans are
leaving assets in 401(k) and 403(b) plans with their former employers, in part
because a lack of advice and knowledge.
“This year, 30% of respondents said they have left assets in
one or more 401(k) or 403(b) plans at a previous employer, up from 22% in 2014
and 15% in 2013,” researchers explain. “Thirty percent say they have done so because
they are satisfied with their past employer’s retirement savings option.”
However, nearly a quarter of respondents (23%) said they
didn’t know a rollover was an option; and 20% said they didn’t know what to do,
so they left their money in their past employer’s plan. Another 15% said they
haven’t rolled over their previous plan assets due to lack of time.
“Ironically, while 15% of respondents noted concern over
lack of time to roll over an employer-sponsored plan, 30% of respondents said
they expect an IRA rollover to be the least time-consuming among a list of tasks
that included renewing a driver’s license, getting a dental cleaning, cable
installation and a home closing,” researchers conclude.
More results from the TIAA-CREF 2015 IRA Survey
Executive Summary can be downloaded here.
The survey was conducted by KRC Research by phone among a national random
sample of 1,013 adults, age 18 years and older, from February 19 to 22, 2015,
using a combination of landline and cell phone interviews.