ICI research found 90% of households that owned mutual funds held shares inside workplace retirement plans, individual retirement accounts (IRAs), and other tax-deferred accounts.
Among those households that made their first mutual fund purchase in 2000 or later, 68% did so inside an employer-sponsored plan. Among those households that made their first purchase before 1990, 56% did so inside an employer-sponsored plan.
Although 69% of mutual fund investors owned funds outside of employer-sponsored retirement accounts, many were also saving for retirement. Fifty-two percent of mutual fund–owning households held funds in their IRAs - in many cases, due to rollovers from 401(k)s or other employer-sponsored retirement plans.
At year-end 2009, mutual funds accounted for $4.1 trillion, or 25%, of the $16 trillion U.S. retirement market, according to ICI. The remaining $11.9 trillion of year-end 2009 retirement market assets were managed by pension funds, insurance companies, banks, and brokerage firms. The $4.1 trillion in mutual fund retirement assets represented 36% of all mutual fund assets at year-end 2009.
Assets in defined contribution plans have grown more rapidly than assets in other types of employer-sponsored retirement plans over the past quarter century, increasing from 27% of employer plan assets in 1985 to 40% of assets at year-end 2009. At the end of 2009, employer-sponsored DC plans - including 401(k) plans, 403(b) plans, 457 plans, Keoghs, and other DC plans - held an estimated $4.1 trillion in assets. With $2.8 trillion in assets at year-end 2009, 401(k) plans held the largest share of employer-sponsored DC plan assets.
Two other plan types - 403(b) plans and 457 plans - held another $851 billion in assets. The remaining $483 billion in DC plan assets were held by other DC plans without 401(k) features.
At the end of 2009, $1.5 trillion of 401(k) plan assets were invested in mutual funds. Mutual funds’ share of the 401(k) market increased to an estimated 55% at year-end 2009, up from 51% at year-end 2008, but still below the 57% share reached in 2007.
Retirement is not the only financial goal for households’ mutual fund investments. Forty-nine percent of mutual fund–owning households reported that reducing their taxable income was one of their goals; 46% listed saving for an emergency as a goal; and 26% reported saving for education among their goals.