Americans Hit Record $48.1T in Retirement Savings. Some Are Still Worried
The growth illustrates a savings mindset that investors have been bolstering for decades. However, it’s different on the individual level.
Sign up for market insights, wealth management practice essentials and industry updates.
Keep it up.
US retirement assets reached a record $48.1 trillion by the end of the third quarter, up 4.5% from the previous quarter, according to new data from the Investment Company Institute. That type of wealth isn’t built overnight; instead, it illustrates a savings mindset that Americans have been bolstering for decades. “Today’s account balances reflect years of paycheck-by-paycheck contributions,” ICI told Advisor Upside in a statement.
Still, on the individual level, things aren’t as rosy. “The aggregate figure masks a more sobering reality for many savers: Most Americans do not feel adequately prepared for retirement,” said Mike Casey, founder of AE Advisors. It’s one of the many reasons why some advisors are pushing for greater access to clients’ 401(k)s to help guide them through retirement.
Safe and Sound
By the end of September, retirement savings accounted for just over a third of all household financial assets. IRAs continue to be the largest segment, growing to nearly $19 trillion, up more than 5% from the second quarter. Since 2000, almost all of the money flowing into IRAs has been from either workplace plan rollovers or contributions to employer-sponsored IRAs, like SIMPLE IRAs, according to ICI.
The data also found:
- Employer-based defined contribution plans grew to almost $14 trillion, and about $10 trillion of that was held in 401(k)s.
- Going even deeper, $5.8 trillion in those 401(k)s are managed by mutual funds, with equity and hybrid funds being the dominant investment strategies.
Satisfaction with 401(k)s is often mixed, though. Participants value automatic features and employer contributions, but they regularly bump against limited investment choices, high fees in some plans and minimal guidance, Casey told Advisor Upside.
Reality Bites. Investors are becoming more savings-minded, but progress appears to have slowed recently. Just over half of Americans either reduced or stopped contributing to their retirement savings in the past six months, with many choosing to prioritize healthcare expenses instead, according to Allianz data. Furthermore, 47% say they have had to dip into their retirement savings.
“Closing the preparedness gap requires continued innovation: stronger auto-escalation, broader access to low-cost advice and perhaps guaranteed income options,” Casey said.
