Americans' retirement assets rose 6.7%, to $17.6 trillion, last year despite tumultuous market conditions.
According to the Investment Company Institute, the strongest growth occurred in individual retirement accounts and employer-sponsored defined contribution plans, including 401(k)s.
The retirement market statistics are reported in the 2008 Investment Company Fact Book, which the institute released Friday.
"In a year of significant disruptions in financial and housing markets, Americans continued to focus on saving for a secure retirement," said Brian Reid, the Washington group's chief economist. "Expanding retirement wealth, particularly in defined contribution plans and IRAs, accounted for half of the increase in households' financial assets last year. Retirement assets now account for nearly 40% of U.S. households' financial assets."
At the end of last year investors held $9.2 trillion in IRA's and defined contribution plans, accounting for about half of the entire retirement market, according to the ICI.
Last year IRA assets rose 12%, to $4.7 trillion, of which $2.2 trillion was invested in mutual funds.
Assets held in defined contribution plans rose 8%, to $4.5 trillion. Mutual funds accounted for $2.4 trillion of that total.
The most popular type of defined contribution plan was the 401(k), which had $3 trillion in assets.
Mutual funds managed $4.6 trillion, or 26% of retirement market assets. The remaining $13 trillion were managed by pension funds, insurance companies, and brokerage firms.
The $4.6 trillion of retirement assets invested in mutual funds made up 38% of the $12 trillion that funds managed at the end of last year. More than 90% of mutual-fund-owning households said they were saving for retirement.
Three-fifths of mutual-fund-owning households invest in funds through an employer-based retirement plan, and 57% of the households that own mutual funds purchased their first fund through an employer-sponsored retirement plan, according to the ICI's data.
Net new cash flow into lifestyle and life-cycle funds reached a record $92 billion last year. These funds, also known as target date funds, are designed for defined contribution plans and become more conservative as the investor approaches retirement.
Assets in life-cycle funds rose 61%, to $183 billion, and 88% of these assets were held in retirement accounts.
Assets in lifestyle funds reached $238 billion, of which 45% were held in retirement accounts.
Most 401(k) assets were invested in mutual funds are concentrated in lower-cost funds. For example, more than three-quarters of the 401(k) assets invested in stock funds were invested in funds with expense ratios of less than 1%.
