A LETTER FROM ICI'S
CHIEF ECONOMIST
ICI RESEARCH:
STAFF AND PUBLICATIONS
SECTION 1:
OVERVIEW OF
U.S.-REGISTERED INVESTMENT COMPANIES
SECTION 2:
RECENT MUTUAL FUND TRENDS
SECTION 3:
EXCHANGE-TRADED FUNDS AND INDEX MUTUAL FUNDS
SECTION 5:
MUTUAL FUND FEES AND EXPENSES
SECTION 6:
CHARACTERISTICS OF MUTUAL FUND OWNERS
SECTION 7:
THE ROLE OF MUTUAL FUNDS IN RETIREMENT AND EDUCATION SAVINGS
APPENDIX A:
HOW MUTUAL FUNDS AND INVESTMENT COMPANIES OPERATE
APPENDIX B:
ICI STATISTICAL RELEASES AND RESEARCH PUBLICATIONS
The English language can be unkind to those who focus on details. Figures of speech such as "can't see the forest for the trees" are not intended as high praise, nor is the label "policy wonk" usually bestowed as a badge of respect, except within certain professional circles of Washington, DC. Conversely, to be called a Renaissance man is thought to be a high compliment, especially in our increasingly complex world.
The value that we place on the intricacies of life, though, depends on where we stand. Specialists in all fields make their livings focusing on details that others may dismiss as unnecessary distractions. Nevertheless, when we turn to them for their expertise we benefit from their depth of knowledge—we want our taxi drivers to have a command of the city's streets as much as our doctors to have mastered the latest medical research.
Public policy has its own set of details, and practitioners focus on the nuances of words, ideas, and data when weighing the effects of public policy initiatives. Laws and regulations create the institutional environment in which people make decisions, and studying these rules helps us understand how and why people make the choices they do. Ignoring the institutional setting can produce incorrect conclusions, and cause voters to push for public policy changes that are at best unhelpful and at worst harmful.
Social Security is the Primary Source of Income for Many Retirees
(percent of aggregate income of individuals age 65 or older who did not work, 1975 and 2006)
Download an Excel file of this data.
Note: Components may not add to 100 percent because of rounding.
Source: ICI tabulations of March 1976 and March 2007 Current Population Survey
As Baby Boomers march toward retirement over the next two decades, public attention is focused on whether they are prepared. The prospect of 78 million Americans with insufficient retirement assets is a legitimate cause for concern, leading some to pine for the halcyon days of the traditional pension, ignoring the fact that most American workers received little or no benefits from these types of pensions. In this environment, a myth—that the private defined contribution pension system is failing workers—has arisen to meet our fears. To support this claim, commentators point to statistics showing that workers often have modest sums in retirement accounts at their current employers.
These statistics generate headlines, but reflect an incomplete measure of retirement savings. For example, they disregard the age and job tenure of workers, critical pieces of information when forecasting the potential of the private retirement system. Young and short-tenured workers do not have an opportunity to accumulate significant balances in their 401(k) and other defined contribution plans, not unlike the small benefits these same workers would accrue with traditional pensions. These statistics also overlook savings that workers may have accumulated in accounts with previous employers or in other types of retirement accounts, such as IRAs.
Another important institutional detail is the role of Social Security in financing retirement for many low- and moderate-income households. In truth, Social Security alone can allow many of these retirees to maintain a standard of living that is very close to what they had in their pre-retirement years. For the past three decades, Social Security has constituted a significant portion of Americans' retirement income, which they have supplemented with pensions and personal savings.
These details are crucial to the public dialogue about retirement. They identify stress points in the current system, and help to form policy solutions to those problems. The research staff at ICI factors in these institutional details when applying statistical and analytical tools to address public policy questions. Our research, when combined with the legal, regulatory, and operational information and analysis produced by other ICI staff, is critical to informing ICI positions on public policy proposals.
The 2008 Investment Company Fact Book provides an entry point to our extensive body of research and statistics on retirement savings, as well as statistics on, and analysis of, all types of registered investment companies and their investors, collectively referred to as funds and fund investors. The goals of ICI's research efforts are to understand and explain the institutional environment in which we live, to inform public policy discussions and decisions, and, ultimately, to help funds better serve their investors.
Brian Reid
Investment Company Institute
May 2008
As Chief Economist, Brian Reid leads the Institute's Research Department and is a member of the Institute's senior management team.
