Filed Under:Life Insurance, Life Planning Strategies

25% of US retirement assets in DC plans

Just 9.2 percent of participants changed the asset allocation of their account balances in the first three quarters of 2013.
Just 9.2 percent of participants changed the asset allocation of their account balances in the first three quarters of 2013.

Most participants in defined contribution plans left their asset allocations unchanged as stock valuations rose during the first nine months of 2013, according to new research.

The Investment Company Institute unveiled this finding in its February 2014 report, “Defined Contribution Plan Participants’ Activities: First Three Quarters of 2013.” The survey details DC plan participants’ withdrawals and contributions, investment activity and loan activity.

The report reveals that that just 9.2 percent of DC plan participants changed the asset allocation of their account balances in the first three quarters of 2013. And 6.8 percent changed the asset allocation of their contributions. The levels of reallocation roughly matched those of the preceding year.

The report notes also that 3 percent of DC plan participants took withdrawals, similar to the pace recorded in the first three quarters of 2012. Hardship withdrawal levels likewise were low during the first nine months of 2013: Just 1.4 percent of DC plan participants took such withdrawals.

The report adds that only 2.5 percent of DC plan participants stopped contributing to their plans during the first three quarters of 2013. This compares with 2.1 and 2.2 percent during the same period in 2012 and 2011, respectively.

The report shows also that loan activity among DC plan participants is higher than the level recorded five years ago.

“This pattern of activity was also observed in the wake of the bear market and recession earlier in the decade,” the report states. “At the end of September 2013, 18.3 percent of DC plan participants had loans outstanding, compared with 18.2 percent at year-end 2012 and 15.3 percent at year-end 2008.

The report indicates that 25 percent of U.S. retirement assets were defined contribution plan assets in the third quarter of 2013. By investment vehicle, retirement assets break down as follows:

  • Individual retirement accounts - 6.2 percent;
  • Federal, state and local pensions - 5.4 percent;
  • 401(k) plans - 4.0 percent;
  • Private defined benefit plans - 2.9 percent;
  • Annuities - 1.9 percent;
  • Other defined contribution plans - 1.6 percent.
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