Data and Research

DC Plans Account for 28% of the Nation’s $26.1 Trillion in Retirement Assets

The Investment Company Institute has issued a report, “Ten Important Facts About 401(k) Plans.”

By Lee Barney editors@strategic-i.com | August 31, 2017

At the end of the first quarter of 2017, Americans held $7.3 trillion in defined contribution (DC) plans, accounting for 28% of the $26.1 trillion in retirement assets, according to a report from the Investment Company Institute (ICI), “Ten Important Facts About 401(k) Plans.”

At year-end 2015, 38% of 401(k) participants were under the age of 40. Twenty-five percent were in their forties, 26% were in their fifties, and 11% were in their sixties.

Fifty-one percent of U.S. households owning DC accounts in mid-2016 had incomes between $25,000 and $99,000. Forty-four percent had incomes of $100,000 or more, and 5% had incomes of less than $25,000.

Ninety-one percent of 401(k) participants said that payroll deduction makes it easier to save, and 90% said owning a DC account helps them to think about their long-term needs. Eighty percent said that the tax treatment of their DC plan is a big incentive to save, and 81% said that their plan offers them good investment options.

Eighty-nine percent of participants receive matches from their company. While this is only 63% in plans with less than $1 million in assets, the incidence of company matches rises as assets rise, to as much as 96% of plans with more than $100 million in assets.

Balances in 401(k) plans rise with participant age and job tenure. For example, the average account balance of participants in their sixties with up to two years of tenure was $37,976, but $280,976 for participants in their sixties with more than 30 years of tenure. Similarly, the average account balance of participants in their forties with up to two years of tenure was $19,088, compared with $158,182 for participants in their forties with more than 20 years of tenure.

Domestic equity funds, international equity funds and domestic bond funds were the most likely investment options to be offered in 401(k) plans. Just over three-quarters, 75.5%, of plans offer target-date funds (TDFs).

At year-end 2014, 43.1% of 401(k) plan participants’ account balances were invested in equity funds. Following that, 19.8% were invested in TDFs, and 8.1% in bond funds.

In 2016, the average expense ratio for equity mutual funds offered in the U.S. was 1.28%; however, in 401(k) plans, the average expense ratio for equity mutual funds was just 0.48%.

Finally, at year-end 2015, only 16% of participants had a 401(k) loan outstanding.

ICI’s full report on the 10 important facts can be downloaded here.