Retirement assets hit $51.2 trillion as savers keep contributing

Americans' retirement savings surged to a record $51.2 trillion by the end of June, a 7.9% increase from the first quarter, according to new data from the Investment Company Institute.

The gain, which pushed retirement assets to roughly a third of all household financial assets nationwide, offers fresh evidence that steady saving habits are outpacing investor anxiety about markets and the broader economy.

Individual retirement accounts led the advance, rising 9.2% to almost $20 trillion, while defined contribution plans climbed 8.7% to an estimated $15 trillion.

Government defined benefit plans held $10.4 trillion, and private-sector pensions accounted for another $3.2 trillion, with annuity reserves outside retirement accounts adding $2.7 trillion more.

DC plans broaden beyond the 401(k)

Within the $15 trillion held in employer-based DC plans, 401(k) plans accounted for $10.8 trillion, according to ICI.

Breaking down the rest, ICI found a total of $1.6 trillion saved in 403(b) plans, most commonly used by employees of schools, hospitals, and nonprofits; $920 billion in other private-sector DC plans; $585 billion in 457 plans, which cover many state and local government employees; and $1.2 trillion in the Thrift Savings Plan, the retirement program for federal employees.

Mutual funds remained the investment vehicle of choice inside 401(k) accounts, managing $6.2 trillion, or 58%, of 401(k) assets at the end of June, ICI reported. Equity funds made up the lon's share at $3.7 trillion, followed by $1.7 trillion in hybrid funds, which includes target date funds.

Read more: What really matters to mutual fund investors?

IRAs nearing $20 trillion milestone

IRA balances reached $19.9 trillion, with 41% of that total, or $8 trillion, invested in mutual funds, according to ICI. As with 401(k) plans, equity funds were the most common holding inside IRAs, accounting for $4.8 trillion, followed by $1.3 trillion in hybrid funds.

Combined across IRAs and DC plans, mutual funds represented $15.9 trillion, or 46%, of all assets held in these account types as of June, ICI found. Mutual fund exposure to retirement-oriented savings extends further still through variable annuities, which carry many of the same tax advantages and restrictions as formal retirement accounts. Mutual fund assets held inside variable annuities outside retirement plans totaled $1.5 trillion in June, according to the ICI data.

The quarter's growth follows separate account-level data from Fidelity Investments, which found the average 401(k) balance reached $155,000 in the second quarter, a 10.5% jump from the first quarter and the strongest quarterly gain the firm has recorded since late 2020. Meanwhile, average 403(b) balances rose to $145,000, up 11.5% over the same period.

Read more: Fidelity: 401(k), IRA balances hit record highs in Q2

IRA contributions climbed 36% year over year, and 81.2% of 401(k) participants saved enough to capture their full employer match, Fidelity found. Combined savings rates held at 14.4% for 401(k) participants and 12% for 403(b) participants, both just below the firm's recommended 15% benchmark.

Fidelity's data also pointed to structural growth beyond existing participants. Small-business retirement accounts, including self-employed 401(k)s, SEP IRAs, and Simple IRAs, have grown 178% since 2021, with contributions up 46% over the same period.

Small-business retirement contributions made up 28% of all retail retirement contributions in the second quarter, and millennial investors were the most active cohort opening new small-business retirement accounts, representing 42% of self-employed 401(k) contributors.