Per recent data shared by the Federal Reserve, retirement assets reach over $19 trillion. This data demonstrates the seriousness that people are approaching their retirement financial planning. Have a look at the numbers and see how the assets are doing when they are classified into various categories.
Retirement Benefits Fund Assets for DB and DC Plan Also Grew
The data shared by Federal Reserve also states that retirement fund assets for Defined Benefit Plan and Defined Contribution Plans (like 401(k)s and the Federal Government’s Thrift Savings Plan) have also grown a lot in the last year. The total assets across the public and private defined contribution (DC) and defined benefit (DB) plans grew by 8 percent. It was $17.6 trillion in 2014, and retirement assets reach over $19 trillion in 2016.
Total financial assets available in private and public DB pension plans were $12.4 billion in 2016. It has increased by 8 percent as it was just 11.5 trillion in 2014. Similarly, the total financial assets in DC plans were $6.7 trillion in 2016. It is up by 10 percent from $6.1 trillion in 2014.
Private DB pension plan assets in 2014 were $3.2 trillion. They were at $3.3 trillion in 2016 which shows an increase of 3 percent. Private DC plan assets in 2014 were $5.2 trillion, and they grew by 9.6 percent in 2016 to stand at $5.7 trillion.
Pension Funds’ Biggest Asset Class Holding
When discussing the performance of retirement benefits fund assets, it is vital to consider pension funds’ largest asset class holding. The largest asset class held by pension funds was corporate equities as it was $4.8 trillion. It is closely followed by debt securities and mutual funds which stand at $3.9 trillion for both of the asset classes. The fourth biggest holding of pension funds in 2016 was Treasury Securities that stood at $2.3 trillion.
When reviewing the performance of retirement benefits fund assets, it is essential to see how the assets of the federal government have performed. The DB plan assets of the federal government were $3.4 trillion, and DC plan assets in 2016 were much less than that as they were just $466 billion. DB plan assets of state and local governments were just $5.6 trillion in 2016 while DC plan assets of state and local governments were just $490 billion.
Looking at the Flows
Debt securities were the biggest purchase of private and public DB plans in 2016 as they were around $190 billion, followed by Treasury Securities that were $120 billion and Corporate and Foreign Bonds at $61 billion.
For all the private DC plans, the highest numbers of inflows in 2016 were to mutual funds, at $24 billion. It was followed by debt securities at $22 billion and corporate and foreign bonds at $12 billion.
For the DC plans of federal government, the biggest purchasers in 2016 were debt and treasury securities as both were at $16 billion. They were followed by assets in the Thrift Savings Plan that were about $12 billion.
The biggest purchases of local and state DC plans in 2016 were unallocated insurance contracts at $8 billion and miscellaneous assets at $7 billion.
The data shared by the Federal Reserve regarding retirement benefits fund assets is a good source of information for investors who wish to understand how these large plans are investing their asset, which may lead to an understanding of how these money managers perceive the economy and the potential investment risks that lie ahead.