Retirement Assets Equal One-Third of U.S. Household Assets

The U.S. Retirement Market, First Quarter 2009 indicates that between December 31, 2008, and March 31, 2009, retirement assets fell 4.4%, from $14.1 trillion to $13.4 trillion. ICI said that during the first quarter, total return on equities was -11%, while bonds returned 0.2%, according to Standard & Poor’s 500 stock index and the Citigroup Broad Investment Grade Bond Index.

Nearly two-thirds of retirement assets were held in employer-sponsored plans at year-end 2008, and 46% of assets held in IRAs were rollovers from employer-sponsored plans, ICI said. At the end of the first quarter, IRAs held $3.4 trillion of retirement market assets; and another $3.4 trillion was held in employer-sponsored DC plans, of which $2.3 trillion was held in 401(k) plans.

Forty-four percent of IRA assets and 45% of DC plan assets were invested in mutual funds. Of the $1.53 trillion in DC plan assets that were held in mutual funds in the first quarter, $855 billion was held in equities.

ICI data shows lifecycle, or target-date, mutual funds managed $159 billion at the end of the first quarter, compared with $164 billion at the end of the fourth quarter of 2008. Almost 90% of assets in lifecycle mutual funds were held in retirement accounts.

While some might speculate that new focus on 403(b) plans brought on by new IRS regulations would mean a shift from investments in insurance products to mutual funds, Investment Company Institute data shows differently.

The U.S. Retirement Market, First Quarter 2009 indicates that insurance companies held 57% of 403(b) plan assets at the end of first quarter 2009, compared to 55% at the end of 2008. Variable annuity mutual funds held 24% of 403(b) plan assets, down from 25%, and non-variable annuity mutual funds held 20%, same as at year-end 2008.

According to the ICI data, $243 billion of 403(b) assets were in mutual funds at the end of the first quarter, compared to $261 billion at the end of 2008. However, 403(b) assets in other investments also declined to $318 billion at the end of first quarter from $320 billion at the end of last year.

The down market was definitely at play in the declines: out of $243 billion in 403(b) assets held in mutual funds, $158 billion was invested in equities.

The report shows similar findings for 457 plan assets. At the end of first quarter 2009, $48 billion of 457 plan assets were in mutual funds, while $87 billion were in other investments. This compares to $51 billion and $89 billion, respectively, at the end of 2008. Of $48 billion in 457 plan assets held in mutual funds, $29 billion was invested in equities.

The ICI report is here .