At the end of 2003, mutual funds accounted for 22% of the $12 trillion invested in the U.S. retirement markets, according to the Investment Company Institute’s 2004 Mutual Fund Fact Book. Of that amount, ICI found $1.4 trillion locked into employer-sponsored accounts and $1.3 trillion in Individual Retirement Accounts (IRA).
Across the IRA plain, mutual funds’ share of the market has increased from 22% in 1990 to 43% of the roughly $3 trillion IRA market in 2003. With approximately 36.4 million U.S. households holding “traditional” IRA assets as of mid-2003, that represents a significant market for mutual fund assets.
ICI found the traditional IRA household held a median of $30,000 in those accounts. Of this total, 45% held IRA assets that were rolled over from an employee retirement plan and the vast majority (64%) of IRA holdings were mutual funds. More than half (54%) of all mutual funds held in IRAs were equity mutual funds, 28% were money market funds, 26% were bond funds and 18% were hybrid funds.
In total, mutual funds were most widely held in IRA, where they made up $1.3 trillion of the total IRA holdings in the U.S. Across other retirement plans, $898 billion of 401(k) assets were held in mutual funds, $260 billion of 403(b) assets were held in funds and mutual funds held $237 billion in other retirement plans. While not as widely held, the share of mutual fund assets in 401(k) plans grew substantially in 2003, compared to just $140 billion of K plan assets held in funds a decade ago. Overall, mutual fund assets held in employer sponsored retirement accounts total $1.4 trillion in 2003, up 28% from the previous year, ICI found.
Defined Contributions Plans
“The most important source of mutual fund assets in the employer-sponsored pension plan market is defined contribution plans, especially 401(k) plans,” ICI said. Mutual funds’ share of the 401(k) market made up 48% at the end of 2003, compared 19% of mutual funds in defined contribution plans held in 403(b) schemes.
Much like IRAs, the majority of mutual fund assets held in 401(k) plans were concentrated in equity funds (40%) at the end of 2002, the ICI found. Other allocations were directed toward:
- Company stock (16%)
- GIC/Stable Value funds (16%)
- Bond funds (11%)
- Balanced funds (9%)
- Money funds (6%)
- Other (2%).
Examining plan balances at the end of 2002, ICI found the average 401(k) account balance, excluding plan loans, was $39,885. Not surprising was the finding that workers in their sixties with at least 30 years of job tenure held the highest 401(k) balances ($146,211).
It is in 529 college savings plans that mutual funds are far-and-away the investment of choice, making up 97% of the $35.1 billion invested in 529 plans at the end of 2003. This is even more significant when compared to the growth of 529 plans of the last year, with savings spike ahead of the $18.5 billion in these plans at the end of 2002. Further the number of accounts rose to more than four million and the average account size was approximately $8,200, ICI said.
A copy of the complete 189-page 2004 Mutual Fund Fact Book can be downloaded at http://www.ici.org/pdf/2004_factbook.pdf . Aside from statistics on mutual funds held in retirement accounts, the Fact Book also includes information on the regulation and taxation of mutual funds, how the fund industry is structured and economic developments in U.S. funds in 2003.