Retirement Accounts Reach $16.4 Trillion

The Investment Company Institute issued a report Wednesday indicating that at the end of last year, Americans had $16.4 trillion in retirement savings, with about half of it in 401(k)s and other company-sponsored retirement accounts, as well as individual retirement accounts.

Those savings are up 11% from the $14.7 trillion in 2005 and 55% from $10.6 trillion in 2002, following three years of market declines.

Of the savings held last year, $4.2 trillion is in IRAs, $4.1 trillion in retirement accounts, $6.5 trillion in pension plans and $1.6 trillion in retirement annuities.

ICI Senior Director of Retirement and Investor Research Sarah Holden, and co-author of the report, said the savings indicate that investors are taking steps to prepare for retirement. ICI Senior Economist Peter Brady, the other co-author of the report, said the findings also indicate the growing importance of employer-sponsored retirement plans, and with them, IRAs, into which investors roll $200 billion a year.

The study also found that traditional IRAs had $3.8 trillion at the end of 2006, while Roth IRAs had $178 billion. More than half of the money in defined contribution plans was in mutual funds, with the rest in stocks, bonds, separately managed accounts and guaranteed investment contracts. Of the money in mutual funds, 70% was in equity mutual funds. Another 14% was in hybrid funds, 8.7% in bond funds and 7.4% in money market funds.

The study also found that lifecycle fund assets grew 52% to $303 billion, up from $200 billion in 2005. “It really reflects demand by individuals to have their asset allocation and rebalancing made simple for them,” Holden said.