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The $3.5 trillion system attracted fresh contributions of $300 billion in 2012, with $276 billion either withdrawn as cash by retirees or rolled over into individual retirement accounts (IRAs), Cerulli estimated according to the FT. The IRA market is already larger at about $5.4 trillion.
However, by 2016 it forecasts that inflows will be $364 billion and outflows $366 billion, with the deficit only widening year on year after that as the core of the baby-boomer generation retires contributing to the pensions timebomb.
The combined value of the U.S. pensions system is some $9 trillion. The total market valuation of the global bond market is now over $100 trillion. By comparison, the total market value of all the gold in world is estimated to be just over $1 trillion.