Despite a number of challenges, total U.S. retirement assets were down only slightly at the end of the third quarter of 2021, according to new data from the Investment Company Institute.
The organization’s quarterly market data release shows that total U.S. retirement assets were $37.4 trillion as of Sept. 30, 2021, down 0.5% from June 30, 2021. Yet, despite the drop, that is still $4 trillion more in total assets as compared to the same period in 2020, when it was $33.1 trillion. Retirement assets accounted for 33% of all household financial assets in the U.S. at the end of September 2021.
Defined Contribution Plans
Americans held $10.4 trillion in all employer-based DC retirement plans on Sept. 30, 2021, of which $7.3 trillion was held in 401(k) plans, the ICI notes. The third quarter data also shows that DC plan assets were down 0.8% from June 30, 2021.
In addition to 401(k) plans, at the end of the third quarter:
- $660 billion was held in other private-sector DC plans;
- $1.2 trillion in 403(b) plans;
- $408 billion in 457 plans; and
- $797 billion in the Federal Employees’ Thrift Savings Plan (TSP).
Mutual funds managed $4.8 trillion—or 65%—of assets held in 401(k) plans at the end of September 2021. With $2.8 trillion, equity funds were the most common type of funds held in 401(k) plans, followed by $1.3 trillion in hybrid funds, which include target date funds, the ICI’s data further shows.
Individual Retirement Accounts
Assets in individual retirement accounts (IRAs) totaled $13.2 trillion at the end of the third quarter of 2021, a decrease of 0.6% from the end of the second quarter of 2021. Of that, 45% of IRA assets, or $5.9 trillion, was invested in mutual funds. And with $3.4 trillion, equity funds were the most common type of funds held in IRAs, followed by $1.1 trillion in hybrid funds.
DB Plans and Other Developments
Private-sector DB plans held $3.7 trillion in assets at the end of the third quarter of 2021. In addition, annuity reserves outside of retirement accounts accounted for another $2.5 trillion.
Governmental DB plans—including federal, state and local government plans—held $7.6 trillion in assets at the end of September 2021, a 0.3% increase from the end of June.
Total U.S. retirement entitlements were $43 trillion as of September 30, 2021, including $37.4 trillion of retirement assets and another $5.7 trillion of unfunded liabilities. Including both retirement assets and unfunded liabilities, “retirement entitlements” accounted for 38% of the financial assets of all U.S. households at the end of September.
Under the ICI’s estimates, retirement entitlements include both retirement assets and the unfunded liabilities of DB plans. The organization notes that unfunded liabilities are a larger issue for governmental DB plans than for private-sector DB plans. As of the end of the third quarter of 2021, unfunded liabilities were 41% of benefit entitlements for state and local government DB plans, 45% of benefit entitlements for federal government DB plans, and only 3% of benefit entitlements for private-sector DB plans.