Retirement Assets Now One-Third of U.S. Household Assets

The report, “The U.S. Retirement Market, First Quarter 2009” indicates that between December 31 and March 31, retirement assets fell 4.4%, from $14.1 trillion to $13.4 trillion. ICI said that during the first quarter, total return on equities was -11%, while bonds returned 0.2%, according to Standard & Poor’s 500 stock index and the Citigroup Broad Investment Grade Bond Index.

Nearly two-thirds of retirement assets were held in employer-sponsored plans at year-end 2008, and 46% of assets held in IRAs were rollovers from employer-sponsored plans, according to ICI. At the end of the first quarter, IRAs held $3.4 trillion of retirement market assets; another $3.4 trillion was held in employer-sponsored DC plans, of which $2.3 trillion was held in 401(k) plans.

Forty-four percent of IRA assets and 45% of DC plan assets were invested in mutual funds. Of the $1.53 trillion in DC plan assets that were held in mutual funds in the first quarter, $855 billion was held in equities.

ICI data show lifecycle, or target-date, mutual funds managed $159 billion at the end of the first quarter, compared to $164 billion at the end of the fourth quarter of 2008. Almost 90% of assets in lifecycle mutual funds were held in retirement accounts.

Surprising Findings for 403(b)s?

While some might speculate that new focus on 403(b) plans brought on by new IRS regulations would mean a shift from investments in insurance products to mutual funds, Investment Company Institute data show differently.

“The U.S. Retirement Market, First Quarter 2009” indicates that insurance companies held 57% of 403(b) plan assets at the end of first quarter 2009, compared to 55% at the end of 2008. Variable annuity mutual funds held 24% of 403(b) plan assets, down from 25%, and non-variable annuity mutual funds held 20%, same as at year-end 2008.

According to the ICI data, $243 billion of 403(b) assets were in mutual funds at the end of the first quarter, compared to $261 billion at the end of 2008.  However, 403(b) assets in other investments also declined to $318 billion at the end of first quarter from $320 billion at the end of last year.

The down market was definitely at play in the declines: Out of $243 billion in 403(b) assets held in mutual funds, $158 billion was invested in equities.

The report shows similar findings for 457 plan assets. At the end of first quarter 2009, $48 billion of 457 plan assets were in mutual funds, while $87 billion were in other investments. This compares to $51 billion and $89 billion, respectively, at the end of 2008. Of $48 billion in 457 plan assets held in mutual funds, $29 billion was invested in equities.

The ICI report is here.