Data and Research March 23, 2017

Bulk of Target-Date Funds in Retirement Accounts

Eighty-eight percent of target-date mutual fund assets were held through defined contribution (DC) plans, ICI finds.
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As of December 31, 2016, target-date mutual fund assets totaled $887 billion, up 1.5% in the fourth quarter and up 16.3% for the year, according to data from the Investment Company Institute (ICI).

Retirement accounts held the bulk of target-date mutual fund assets: 88% of target-date mutual fund assets were held through defined contribution (DC) plans (67% of the total of DC plan assets) and individual retirement accounts (IRAs) (20%) at year-end 2016.

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Total U.S. retirement assets were $25.3 trillion as of December 31, 2016, up 1.4% from the end of September 2016 and up 6.1% for the year. Retirement assets accounted for 34% of all household financial assets in the United States at the end of 2016.

DC plan assets were $7.0 trillion in the fourth quarter of 2016, up 1.3% from a revised estimate of $6.9 trillion in the third quarter of 2016. Government defined benefit (DB) plans—including federal, state, and local government plans—held $5.5 trillion in assets as of the end of December, a 2.4% increase from the end of September. Private-sector DB plans held $2.9 trillion in assets at the end of the fourth quarter of 2016, and annuity reserves outside of retirement accounts accounted for another $2.0 trillion.

Americans held $7.0 trillion in all employer-based DC retirement plans on December 31, 2016, of which $4.8 trillion was held in 401(k) plans. In addition to 401(k) plans, at the end of the fourth quarter, $550 billion was held in other private-sector DC plans, $905 billion in 403(b) plans, $282 billion in 457 plans, and $467 billion in the Federal Employees Retirement System’s Thrift Savings Plan (TSP).

Mutual funds managed $3.0 trillion, or 63%, of assets held in 401(k) plans at the end of December 2016. With $1.8 trillion, equity funds were the most common type of funds held in 401(k) plans, followed by $835 billion in hybrid funds, which include target-date funds.

IRAs held $7.9 trillion in assets at the end of the fourth quarter of 2016, up 1.1% from the end of the third quarter. Forty-seven percent of IRA assets, or $3.7 trillion, was invested in mutual funds, predominately in equity funds ($2.0 trillion).

The quarterly retirement data tables are available at “The US Retirement Market, Fourth Quarter 2016.”

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