ICI: Retirement Assets Dropped 12% in Q1

Data from the Investment Company Institute (ICI) reveals that retirement assets across the board took a hit in the first quarter, but it could have been worse.  

 

DC plan assets were down 12.3% from the beginning of the year, dropping to $7.9 trillion for all employer-based DC retirement plans as of March 31, 2020, according to the ICI’s “The U.S. Retirement Market, First Quarter 2020.” Of this amount, $5.6 trillion was held in 401(k) plans. 

Besides 401(k) plans, the first quarter data shows that $490 billion was held in other private-sector DC plans, $988 billion in 403(b) plans, $305 billion in 457 plans and $580 billion in the Federal Employees Retirement System’s Thrift Savings Plan (TSP). 

 

Mutual funds managed $3.3 trillion or nearly 60% of assets held in 401(k) plans at the end of March 2020. Equity funds, not surprisingly, were the most common type of funds held in 401(k) plans with $1.8 trillion, followed by $939 billion in hybrid funds, which include target date funds. 

 

Overall, ICI notes, total U.S. retirement assets were $28.7 trillion as of March 31, 2020, down 11.9% from the beginning of the year. Retirement assets accounted for 33% of all household financial assets in the U.S. at the end of March 2020.

 

 

Private-sector DB plans held $3.2 trillion in assets at the end of the first quarter of 2020, while annuity reserves outside of retirement accounts accounted for another $2.2 trillion.

 

Total U.S. retirement entitlements, as of March 31, 2020, were $35.7 trillion, including $28.7 trillion of retirement assets and another $6.9 trillion of unfunded liabilities, the ICI notes. Including both retirement assets and unfunded liabilities, “retirement entitlements” accounted for 41% of the financial assets of all U.S. households at the end of March.

 

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 first quarter, unfunded liabilities were 11% of private-sector DB plan entitlements, 55% of state and local government DB plan entitlements and 46% of federal DB plan entitlements.

 

 

Meanwhile, assets in IRAs totaled $9.5 trillion at the end of the first quarter, which was a decrease of 13.7% from the end of the fourth quarter of 2019, the ICI notes. Forty-three percent of IRA assets, or $4.1 trillion, was invested in mutual funds. The most common type of funds held in IRAs were equity funds with $2.1 trillion, followed by $839 billion in hybrid funds.

 

Estimates of mutual fund assets held in retirement accounts are based on data from ICI’s Quarterly Questionnaire for Retirement Statistics, which gathers data from 22,016 mutual fund share classes representing approximately 87% of mutual fund industry assets at the end of the first quarter 2020. 

 

It’s worth reiterating that these findings are from the end of the first quarter, when the COVID-19 pandemic was wreaking havoc on the markets. Since then, the markets have generally shown some improvement, though we’re not out of the woods yet. Additionally, consider that the S&P 500 Index for the first quarter declined by nearly 20% and the Russell 2000 Index declined by more than 30%.