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Saving for the future

By PAMELA YIP
Staff Writer pyip@dallasnews.com

LOCAL ECONOMIC SNAPSHOT | RETIREMENT

KYLE ALCOTT
Staff Artist kalcott@dallasnews.com

Workers saving for retirement brought total retirement assets up 4.9 percent in the fourth quarter of 2011, but they were unchanged for the year, according to the Investment Company Institute. Retirement savings accounted for 36 percent of all household financial assets in the U.S. in 2011, compared with 13 percent in 1975.

Retirement savings comparison


Assets in IRAs totaled $4.9 trillion at the end of 2011, up 4.6 percent from the end of the third quarter. Assets in defined contribution plans, such as 401(k)s, rose 4.8 percent in the fourth quarter to $4.5 trillion.

ANNUAL COMPARISONS (In trillions)


GOVERNMENT PENSION PLANS
5 4 3.8 3 1.4 1.5 1.6 1.4 1.5 2 1 0 05 06 07 08 09 05 06 07 08 09 4.3 4.5 3.6 4.1

PRIVATE PENSIONS
(defined benefit plans) 5 4 3 2 1 0 05 06 07 08 09 2.6 2.3 2.5 2.2

DEFINED CONTRIBUTION PLANS


(such as 401(k)s) 5 4 3.6 3 4.1 4.4 3.4 5 4 4 3 2 1 0 05 06 07 08 09 05 06 07 08 09
*Estimate

ANNUITIES
5 4 3 2 1 0

IRAs
4.7 4.2 3.4 3.7 4.4*

2 1 0

QUARTERLY COMPARISONS (In trillions)


ANNUITIES
5 4 3 2 1.6 1.6 1.6 1.6 1.6 1 0 Q4 Q1 Q2 Q3 Q4 2010 2011 5 4 3 2 1 0 Q4 Q1 Q2 Q3 Q4 2010 2011

GOVERNMENT PENSION PLANS


4.4 4.6 4.6 4.2 4.5

PRIVATE PENSIONS
5 4 3 2 1 0 Q4 Q1 Q2 Q3 Q4 2010 2011 2.4 2.5 2.5 2.3 2.4

DEFINED CONTRIBUTION PLANS


5 4 3 2 1 0 Q4 Q1 Q2 Q3 Q4 2010 2011 4.5 4.6 4.7 4.3 4.5 5 4 3 2 1 0

IRAs
5.1* 4.9* 4.8* 5* 4.7*

Q4 Q1 Q2 Q3 Q4 2010 2011 *Estimate

SOURCES: Investment Company Institute; Federal Reserve Board; National Association of Government Defined Contribution Administrators; American Council of Life Insurers; Internal Revenue Service

Asset control
Mutual funds manage most of the assets in defined contribution plans. Other investments consisted of company stock and guaranteed investment contracts sold by insurance companies.
(In trillions)

The top defined contribution plans in North Texas


North Texas companies are following the trend of moving toward defined contribution plans (such as 401(k)s) and away from traditional pensions. (In billions)
AT&T Exxon Mobil American Airlines GuideStone Financial Resources of the Southern Baptist Convention Southwest Airlines J.C. Penney Texas Instruments Fluor Burlington Northern Santa Fe Kimberly-Clark Tenet Healthcare Alcon Laboratories Southwest Airlines Pilots Association Energy Future Holdings Dean Foods Ericsson Comerica Texas Health Resources Baylor Health Care System 7-Eleven 3.0 2.7 2.6 2.2 2.2 2.0 1.6 1.3 0.9 0.9 0.9 0.8 0.8 0.8
SOURCE: Money Market Directory and Dimensional Fund Advisors

$22.2 19.3 10.5 7.1 4.8 3.7

MUTUAL FUNDS
3 2 1 0 Q1 Q2 Q3 2011 Q4 1.9 2 1.7 1.8

OTHER INVESTMENTS
3 2 1 0 1.2 1.2 1.2 1.2

Q1

Q2 Q3 2011

Q4

SOURCES: Investment Company Institute; Federal Reserve Board; U.S. Department of Labor

The bottom line


One of the most important trends is that over the period starting in January, 42 percent of [defined contribution] plans are looking at changing their investment lineup. Traditionally, only about one in 10 plans change their fund lineup. Folks appreciate having this special tax advantage and this special bucket or place where they can put money aside for retirement. As more and more companies in the private sector do away with traditional pension plans in favor of defined contribution plans, such as 401(k)s, workers should take advantage of education programs offered by their employers, as well as outside education, to improve their financial literacy. Pamela Yip, staff writer, The Dallas Morning News

Tim Kohn, head of Defined Contribution Services, Dimensional Fund Advisors

Sarah Holden, senior director of retirement and investor research, Investment Company Institute