Data & Research March 23, 2017

Equity Funds Most Common Type of Fund Held in 401(k)s

This was followed by $835 billion in hybrid funds, which include target-date funds, ICI found.
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As of December 31, 2016, target-date mutual fund assets totaled $887 billion, up 1.5% in the fourth quarter and up 16.3% for the year, according to data from the Investment Company Institute (ICI).

Retirement accounts held the bulk of target-date mutual fund assets: 88% of target-date mutual fund assets were held through defined contribution (DC) plans (67% of the total of DC plan assets) and individual retirement accounts (IRAs) (20%) at year-end 2016.

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Total U.S. retirement assets were $25.3 trillion as of December 31, 2016, up 1.4% from the end of September 2016 and up 6.1% for the year. Retirement assets accounted for 34% of all household financial assets in the United States at the end of 2016.

DC plan assets were $7.0 trillion in the fourth quarter of 2016, up 1.3% from a revised estimate of $6.9 trillion in the third quarter of 2016. Government defined benefit (DB) plans—including federal, state, and local government plans—held $5.5 trillion in assets as of the end of December, a 2.4% increase from the end of September. Private-sector DB 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.

Americans held $7.0 trillion in all employer-based DC retirement plans on December 31, 2016, of which $4.8 trillion was held in 401(k) plans. In addition to 401(k) plans, at the end of the fourth quarter, $550 billion was held in other private-sector DC plans, $905 billion in 403(b) plans, $282 billion in 457 plans, and $467 billion in the Federal Employees Retirement System’s Thrift Savings Plan (TSP).

Mutual funds managed $3.0 trillion, or 63%, 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.

IRAs held $7.9 trillion in assets at the end of the fourth quarter of 2016, up 1.1% 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 ($2.0 trillion).

The quarterly retirement data tables are available at “The US Retirement Market, Fourth Quarter 2016.”

Data & Research March 23, 2017

Majority of Investors Feel Confident About Retirement

Seventy-eight percent think they will be comfortable in retirement, up from 69% in 2014.
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Seventy-eight percent of investors think they will have enough money to maintain the lifestyle they want in retirement, up from 69% in 2014, according to the Wells Fargo/Gallop Investor and Retirement Optimism Index. In fact, 31% feel highly confident, up from 26%, and those who are not confident has fallen from 31% to 22%.

A big factor that helps people attain this confidence is having a written plan; 43% of those with a written plan are highly confident they are headed towards a comfortable retirement, whereas 23% of those without a written plan feel highly confident.

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In step with this, only 36% worry they will outlive their savings, down from 46%. This fear is higher among non-retirees (39%) than those who have reached retirement (28%).

“Although we are experiencing rising account values and optimism, it’s important not to underestimate the importance of a thoughtful strategy and  a written plan not only for saving and investing, but also for drawing down funds in retirement given the complexities of longevity, taxes and when to begin Social Security benefits,” says Joe Ready, head of Wells Fargo Institutional Retirement and Trust.

Only 28% of non-retirees have thought about when would be a good time to retire. However, this rises to 39% of those age 50 and older. Among those who have retired, 52% wish they had started thinking about when to retire earlier than they did.

“The actual age you retire is a really important factor in determining your monthly income and how long it will last,” Ready says. “The sooner you start to plan your retirement age, the more you can control while you still have a long runway ahead of you to make adjustments to your strategy.”


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Another potential driver for this improvement in people’s retirement outlook is the fact that the Wells Fargo/Gallop Investor and Retirement Optimism Index is at a 16-year high, having increased 30 points since the fourth quarter of 2016 to 126.

Sixty percent of investors believe now is a good time to invest in the financial markets, up from 52% in the fourth quarter of 2016 and the highest since early 2011. Asked what they would do with their money if their tax bill was decreased, 47% say increase their savings or investments, followed by paying down debt (10%) or making a special purchase (8%).

“It’s especially noteworthy that seven out of 10 would improve their financial health through either saving and investing or paying down debt as a result of a potential tax cut,” Ready says. “Saving and investing enough is the No. 1 factor that will drive retirement outcomes.”

Only 37% of non-retired investors and 40% of retired investors have a written financial plan, on par with the findings of the 2015 survey. However, 48% of investors with $100,000 or more in investments have a written plan, compared to 29% of investors with less than $100,000 in investments.

The Wells Fargo/Gallop Investor and Retirement Optimism Index is based on a telephone survey of 1,007 investors with $10,000 or more in investable assets, conducted in February.

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