The Investment Company Institute just released its findings of the strength of the U.S. retirement market, and we like what we see. Yes, the numbers will most likely be much different in 2008, but we'll take the good news where we can. Among the highlights:
Total U.S. retirement accumulations were $17.6 trillion at year-end 2007, a 7 percent increase over year-end 2006. Retirement assets now account for nearly 40 percent of all U.S. household financial assets, compared with 25 percent two decades ago.
Employer-sponsored retirement plans play a key role in helping American workers accumulate retirement assets. The bulk (nearly two-thirds) of Americans' retirement assets is held in employer-sponsored retirement plans. Furthermore, a significant portion of assets held in Individual Retirement Accounts originated in employer plans and were then transferred (or "rolled over") into IRAs.
Over half of Americans' retirement savings are held in defined contribution plans and IRAs. Assets in defined contribution plans and IRAs continued to grow more rapidly than assets in other types of retirement plans in 2007, increasing 11 percent compared with 3 percent asset growth for other retirement plans. Together, assets in DC plans and IRAs represented 52 percent of retirement assets in 2007, up from 39 percent in 1990.
DC plan and IRA assets invested in mutual funds constituted 26 percent of Americans' retirement savings in 2007. Mutual funds manage 52 percent of DC plan assets and 47 percent of IRA assets. The growth in assets in these retirement plans in recent years has lifted mutual funds' share of the retirement market.