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U.S. Retirement Assets Up 6% Year Over Year

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Total U.S. retirement assets were $24.7 trillion as of Dec. 31, according to Investment Company Institute’s quarterly retirement market data for fourth quarter 2014. This is up 1.7% from $24.2 trillion on Sept. 30, 2014, and up 6% from year-end 2013.

ICI also reports that retirement assets accounted for 36% of all household financial assets in the United States at the end of the fourth quarter of 2014.

In its report, ICI breaks down the total U.S. retirement assets by plan type:

Individual Retirement Accounts

Assets in individual retirement accounts (IRAs) accounted for $7.4 trillion of the total U.S. retirement assets at the end of the fourth quarter of 2014, up 1.4% from $7.3 trillion at the end of the third quarter of 2014. According to ICI, 48% of IRA assets, or $3.5 trillion, were invested in mutual funds.

Defined Contribution Plans

Defined contribution plan assets rose 2.1 % in the fourth quarter to $6.8 trillion in all employer-based DC retirement plans. Mutual funds managed $3.7 trillion (or 55 %) of assets held in DC plans at the end of December.

Of the $6.8 trillion in all DC plans, $4.6 trillion was held in 401(k) plans in Q4, up from $4.5 trillion in the prior quarter. In addition to 401(k) plans, other private-sector DC plans held $560 billion at the end of the fourth quarter, 403(b) plans held $951 billion, 457 plans held $261 billion, and the Federal Employees Retirement System’s Thrift Savings Plan (TSP) held $427 billion.

Defined Benefit Plans

Assets in government defined benefit plans, which include federal, state and local government plans, increased 1.9% quarter-over-quarter to $5.2 trillion in assets as of the end of December. Private-sector DB plans held $3.2 trillion in assets at the end of the fourth quarter, and annuity reserves outside of retirement accounts accounted for another $2 trillion.

Within DB plans are retirement entitlements, which 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,” according to ICI. “To the extent that pension plan assets are insufficient to cover accrued benefit entitlements, a DB pension plan has a claim on the plan sponsor.”

U.S. total retirement entitlements were $27.8 trillion as of Dec. 31 — of that, $24.7 trillion were retirement assets, and another $3.1 trillion were unfunded liabilities. Retirement entitlements — including both retirement assets and unfunded liabilities — accounted for 41% of the financial assets of all U.S. households at the end of December.

“Unfunded liabilities are a larger issue for government DB plans than for private-sector DB plans,” ICI states.

As of the end of Q4, unfunded liabilities were 1% of private-sector DB plan entitlements, 25% of state and local government DB plan entitlements, and 56 % of federal DB plan entitlements.

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