Investing May 24, 2002

Nearly Half 401(k) Assets in Mutual Funds

May 24, 2002 (PLANSPONSOR.com) - Mutual funds continue to stake out a growing share of the employer-sponsored retirement plan market, according to data just released from the Investment Company Institute (ICI).
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Mutual fund assets held in employer-sponsored retirement accounts totaled $1.2 trillion in 2001.  While that is a decrease of 4% from a year earlier, mutual funds accounted for approximately 14% of the overall $8.5 trillion employer-sponsored pension market at year-end 2001, compared to just 2% in 1990, according to ICI.

According to the 2002 Mutual Fund Factbook, the picture is even more striking among 401(k) accouts, where nearly 44% of the total assets are invested in mutual funds.

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Split “Up”

Based on preliminary data, the $2.36 trillion invested by retirement programs in mutual funds was split nearly evenly between individual retirement accounts (IRAs) and employer-sponsored accounts, including 401(k), 403(b)s, 457 plans and pension programs. The former containing $1.17 trillion at year end 2001, while employer-sponsored programs contained $1.19 trillion.  In fact, the $2.36 trillion invested by retirement programs represents about a third of all mutual fund investments, according to ICI.

Among employer-sponsored programs, the asset breakdown was:

  • $765 billion in 401(k) accounts,
  • $231 billion in 403 (b) accounts, and
  • $193 billion in other retirement plans

That compared with just $46 billion for 401(k), $68 billion for 403(b) and $33 billion in other retirement plans in 1991.

Pension Palette

The IC report noted that the employer-sponsored pension market comprises:

  • $1.9 trillion in assets in private defined benefit pension funds,
  • $2.5 trillion in private defined contribution and pension funds (and 457 plans),
  • $2.2 trillion in state and local government employee retirement funds,
  • $1.2 trillion in annuity reserves, and
  • $0.8 trillion in federal government defined benefit plans


Including assets in individual retirement accounts (IRAs), mutual funds accounted for $2.4 trillion, or 22% of the $10.9 trillion US retirement market. 

Over the past decade IRAs have increasingly moved toward mutual fund investments.  At the close of 2001 mutual funds made up 49% of all IRA assets, up dramatically from just 14% in the mid-1980s.  Approximately 40% of American households owned an IRA as of May 2001 – with some 34.1 million owning traditional IRAs, 11.9 million households holding Roth IRAs, an estimated 5.2 million holding SEP IRAs or SAR-SEP IRAs, and 4.1 million holding SIMPLE IRAs.

Traditional IRA households held a median of $30,000 in their traditional IRAs in 2001, typically in two accounts, according to the report.  Almost 45% included assets rolled over from employer-sponsored plans, while nearly a third also had a Roth IRA. 

More than one in three Roth IRA households opened a Roth IRA as their first IRA account.  Nearly all, 90%, of those with a Roth IRA were still employed.

College Poll

The ICI report also noted that in the emerging education savings market, mutual funds accounted for an estimated 98% of the $8.5 billion Section 529 savings plan market at year-end 2001, as well as $2 billion in Coverdell Education Savings Accounts (formerly Education IRAs).

Benefits May 23, 2002

Boredom Can Be Fatal

May 23, 2002 (PLANSPONSOR.com) - Bored workers may soon be dead workers.
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The was the bottom line of a new study, which found that employees given little chance to affect their work tend to die earlier than those allowed more leeway to make their own workplace decisions, according to a Reuters news report.

Researchers at the University of Texas Health Science Center in Houston found that people who spent their working lives in jobs where they had to make few decisions were 43% more likely to die than people in jobs with a lot of decision-making opportunities, and the increased risk continued for up to 10 years after they left their jobs.

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People who spent their working lives in passive jobs, described as those with low demands and low control over what work they do and when, were also 35% more likely to die up to 10 years after the job ended.

According to researchers, many jobs giving workers little control can be highly repetitive with little variety of needed skills – making it that much harder for workers to become engrossed in their workplace tasks.

If a worker’s assigned task are so passive that he or she has to struggle to stay awake, researchers said, that could trigger the damaging release of stress hormones.

 Encouragingly, the researchers found that people with jobs that offered only a certain amount of decision-making opportunities were less likely to die early than those given no control.
 
The findings are based on surveys of the physical and psychological working conditions of members of 5,000 households from 1968 to 1991. Jobs were classified according to decision-making opportunities, psychological demands, security, support, and physical demands.

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