The challenges of preparing for the next economic downturn come as the stock market has reached new highs and retirement assets have achieved new records.
Defined contribution assets hit an all-time high of $5.1 trillion and individual retirement account assets reached a record high of an estimated $5.4 trillion during the fourth quarter of 2012, according to the latest quarterly report by the Investment Company Institute, Washington.
DC plan assets had dropped to $3.4 trillion at year-end 2008 vs. $4.4 trillion in 2007, while IRA assets dropped to $3.7 trillion from $4.7 trillion during the same period, ICI said.
Pensions & Investment's annual survey of DC plan record keepers showed assets reached an all-time high of $4.45 trillion as of Sept. 30, 2012, up 11.2% from $4 trillion at year-end 2011.
Fidelity Investments, Boston, the largest DC record keeper, recently reported average account balances for participants in clients' plans reached a nominal record of $77,300 as of Dec. 31, up 11.9% from year-end 2011. About two-thirds of the gain was due to market appreciation.
Other ICI research shows that participants today are somewhat less risk averse than they were during the economic crisis. Among households participating in DC plans or IRAs, 21% said in the fall of 2008 that they were unwilling to take risks with financial investments. Another 12% said they would only take below-average risk for below-average gain.
By the fall of 2009, these risk percentages were 17% and 9%, respectively. In the survey covering November 2012-January 2013, the unwilling-to-take-risk group represented 19% of respondents and the low-risk group accounted for 9%.
