The government and policymakers must work together if the 401(k) plan is going to remain the dominant private-sector device for retirement savings, said Paul Schott Stevens, president of the Investment Company Institute (ICI), at the ICI’s 50th annual conference May 7.
Stevens urged retirement plan participants with mutual fund investments to “stay the course” in these tough times for the markets. He noted that the average account balance of workers who remained in the same 401(k) plan from 1999 to 2006–a period that included a serious bear market–jumped nearly 80%, from $67,800 to $121,000 including contributions.
Indeed, James Riepe, senior advisor and retired vice chairman of T. Rowe Price, who moderated a panel discussion on May 8, noted that the size of the retirement market is huge, with $18 trillion now invested in tax-deferred retirement accounts. The ICI’s own numbers show that at year-end 2007, investors held $9.2 trillion in IRAs and defined contribution plans.
In 2007, ICI says that assets in IRAs rose 12% to $4.7 trillion, of which $2.2 trillion was invested in mutual funds. Assets held in defined contribution plans rose 8% last year to $4.5 trillion, ICI says, while mutual funds accounted for $2.4 trillion of that total. The most popular type of defined contribution plan last year, ICI says, was the 401(k), totaling $3 trillion in assets.