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Retirement Wealth of Older Americans Hits New High

Retirement assets of older Americans surged to a new high of $3.5 trillion last year, according to a new report.

While retirement savings grew to one third (33.7%) of all household investable assets at $13.9 trillion, retirement assets of consumers age 65 to 74 surged from $2.3 trillion, and now constitute a quarter of total retirement assets, according to the 2014 Portrait of U.S. Household Wealth: Market Sizing, Segmentation and Product Ownership by Hearts & Wallets.  

Retirement assets grew much faster from year-end 2012 to year-end 2013, increasing by nearly 17%, from $11.9 trillion. That growth surge was faster than at any point since the Great Recession, when retirement assets decreased from $10.5 trillion to $8.1 trillion.

Individual Retirement Accounts (IRAs) bolstered their position as the fastest growing and largest retirement asset, totaling nearly half (46.8%) of all retirement savings at $6.5 trillion. IRAs increased more than 20% in a single year, up from $5.4 trillion in 2012. However, private sector defined contribution (DC) plans also showed strong 20% year-over-year growth, reaching $4.9 trillion.

Retirement Income Market

The retirement income market, defined as households ages 65 and older that withdraw income at 4% or more and are interested in “retirement income solutions,” has reached $4.7 trillion, or 11% of all U.S. household assets. Hearts & Wallets projects this market will reach 20% in 2020. 

But people who are still saving, not retirees, hold the bulk of retirement assets — and the trend of fewer people stopping work altogether introduces a downward pressure on the retirement income market, according to the report.

Investable Assets

Total U.S. investable household assets reached $41.2 trillion at year-end 2013, up from $35.4 trillion the prior year. Earlier increases from 2009 to 2012, ranged from around 12% to more than 5%, as Americans slowly recovered from the Great Recession’s significant dent to household assets in 2008.

Older households — ages 53 years and older — control most of U.S. households investable assets, totaling $30.8 trillion. Older investors who don’t intend to stop full-time work control $9.4 trillion, up from $7.6 trillion last year. Hearts & Wallets research shows these Americans are more influenced to save with a lifestyle control goal rather than a goal of retirement or stopping work. Most households ages 55-64 do not consider retirement a near-term option. Four out of five have not stopped full-time work.

Of course, investable assets, or those liquid monies about which consumers make investment decisions, are only part of the household balance sheet, which also includes accumulated pensions, real estate and, on the liabilities side, mortgage and consumer debt. In addition to the increase in investable assets, some households experienced an increase in stated household wealth thanks to an accounting change in the Federal Reserve’s Flow of Funds Defined Benefit pension accounting. Instead of funded benefit, promised benefit is now counted as household wealth, resulting in a more than $3 trillion wealth increase for government pensioners, according to the report.

More information is available here

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