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Retirement Accounts Seen Headed Towards Mutual Funds

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Jan. 6, 2004 — The amount of assets moving from employer pension plans to individual retirement accounts will double by the end of the decade and a third will wind up in mutual funds, according to a survey by Financial Research Corp.

The financial services consulting company predicts that $2.4 trillion will be rolled over from company benefit plans by 2010, of which about $800 billion will be invested in mutual funds. The forecast is based on the results of a survey of 574 people aged 50-60 who have at least $100,000 in assets available for investment.

The survey also found that investors are more likely to put retirement money into mutual funds than any other investment product. FRC said 61% of those surveyed said they were extremely likely to consider stock and bond funds for retirement accounts. By comparison, 39% said they would consider investing in individual stocks, and 37% said they might target money market funds.

However, despite the amount of IRA assets being rolled over into mutual funds, FRC said it sees funds’ share of the inflow declining in coming years because of competition from investments such as separately managed accounts, exchange traded funds, and annuities.

These vehicles are expected to attract more money because Americans are increasingly relying on investment advisors to help them make decisions about retirement savings, FRC said.

The “vast majority” of those surveyed have IRAs and have been working with a financial advisor for at least five years, FRC said. This finding, the company said, shows that “most asset managers need to focus rollover efforts on marketing products to investors through third-party distributors.”


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