America’s sprawling 401(k) pension system will turn cash flow negative in 2016, threatening disruption for asset managers and selling of equities, according to analysis by Cerulli Associates, a research house.
The $3.5 trillion system attracted fresh contributions of $300 billion in 2012, with $276 billion either withdrawn as cash by retirees or rolled over into individual retirement accounts (IRAs), Cerulli estimated.
However, by 2016 it forecasts that inflows will be $364bn and outflows $366bn, with the deficit only widening year on year after that as the core of the baby-boomer generation retires.
“This has significant implications for asset managers and other financial services providers,” said Bing Waldert, a director at Cerulli. “It is going to be a disappointment for a lot of fund managers that have put a lot of effort into the defined contribution pension fund market.
“For asset managers, the consistent contributions are particularly appealing and provide a source of positive flows even in poor markets when a firm may experience outflows from other segments of the industry.”
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