Total Retirement Assets Reached $24 Trillion in Q2

Retirement assets accounted for 36% of all household financial assets in the United States at the end of the second quarter of 2014, according to an analysis from the Investment Company Institute (ICI). The ICI’s breakdown of assets among different retirement plan types shows $2.0 trillion is currently held in annuity reserves; $5.1 trillion in government defined benefit (DB) plans; $3.2 trillion in private-sector DB plans; $6.6 trillion in defined contribution (DC) plans; and $7.2 trillion in individual retirement accounts (IRAs).

The ICI’s data shows annuity reserves have remained relatively constant, at about $2 trillion, since the end of the third quarter of 2013. IRA assets have grown by about $700 billion since that time, and DC assets experienced growth of around $600 million. Government and private DBs saw about $300 million and $200 million in growth since the end of Q3 2013, respectively.

Looking specifically at the second quarter of 2014, assets in IRAs increased 3.3% from April through June. Defined contribution (DC) plan assets rose 3.6%, while government DB plans—including federal, state, and local government plans—climbed 1.4% between the end of March to the start of July. Private-sector DB plans grew at a slightly higher rate than public DBs during the second quarter of 2014, and annuity reserves outside of retirement accounts largely held steady.

On the DC plan front, $4.4 trillion of the $6.6 total was held in 401(k) accounts at the end of the second quarter of this year, up from $4.3 trillion at the start of the quarter. In addition to 401(k) plans, $941 billion was held in 403(b) plans, $255 billion in 457 plans, and $401 billion in the Federal Employees Retirement System’s Thrift Savings Plan.

An additional $555 billion was held in other types of private-sector DC plans at the end of Q2 2014, the ICI says, and mutual funds managed $3.7 trillion, or 56%, of assets held in all types of DC plans. IRA assets were less likely to be held by mutual funds, with 44%, or $3.1 trillion, invested through mutual funds.

In addition to retirement assets, data on total retirement entitlements have been added to ICI’s recurring reports, beginning with this quarter’s release. Retirement entitlements include both retirement assets and the unfunded liabilities of DB plans. Under a DB plan, employees accrue benefits to which they are legally entitled and which represent assets to U.S. households and liabilities to plans, the ICI says. To the extent that plan assets are insufficient to cover accrued benefit entitlements, a DB plan has a claim on the plan sponsor.

As of June 30, 2014, U.S. total retirement entitlements were $27.1 trillion, including $24.0 trillion of retirement assets and another $3.1 trillion of unfunded liabilities. Including both retirement assets and unfunded liabilities, retirement entitlements accounted for 40% of the financial assets of all U.S. households at the end of June.

Unfunded liabilities are a larger issue for government DB plans than for private-sector DB plans. As of the end of the second quarter of 2014, unfunded liabilities were 1% of private-sector DB plan entitlements, 25% of state and local government DB plan entitlements, and 58% of federal DB plan entitlements.