Nation's Retirement Savings Continues to Grow

July 17, 2006 ( - A new look at the nation's combined retirement savings reflects a 40% increase since 2002 and a continuing trend toward participant-directed savings vehicles.

A news release from the Investment Company Institute said that its latest data show a total retirement net egg of $14.5 trillion in 2005 – a 7% hike over the previous 12 months. Retirement assets now account for more than one-third of household financial assets, up from about 23% in 1985, according to ICI.

The newest report also reflects the trend in which employers move workers away from defined benefit and toward defined contribution programs. The majority of retirement savings, 51%, is now invested in DC plans and Individual Retirement Accounts (IRAs). Over the past two decades, DC plans and IRAs have been growing more rapidly than other retirement accounts; in 2005, DC and IRA assets grew almost 9% while other retirement vehicles grew less than 5%.

Mutual funds remain important stewards of retirement assets, representing about $3.4 trillion of the total stockpile. Mutual funds’ share of the retirement market continued to increase, given their prevalence in rapidly growing DC plans and IRAs. Funds now manage 48% of assets in DC plans and 45% of IRA assets.

Other highlights of the study include:

  • Almost two-thirds of retirement assets are held in employer-sponsored plans, including both defined contribution and defined benefit plans.
  • A significant portion of assets held in IRAs originated in employer plans and were subsequently rolled over into IRAs.
  • In 2005, nearly 70% of the $3.4 trillion in mutual fund retirement assets were invested in equity funds.

The full ICI report is  here .