The takeaway

Assets backing private-sector defined contribution pensions have grown far more than those for private-sector defined benefit pensions. But defined contribution pension assets are also far more volatile.

DC versus DB pensions

Defined contribution (DC) pensions—such as 401(k)s—are investment accounts that both an employee and their employer contribute to. The employee allocates the investments in the account and can make withdrawals from it when they retire. In our FRED graph above, the solid line shows the total value of financial assets in these DC accounts.

Defined benefit (DB) pensions—such as traditional pensions that pay a fixed income when the employee retires—are backed by assets that employers select and manage. In our FRED graph above, the dashed line shows the total value of financial assets that fund these DB pensions.

Why the gap is growing

Our FRED graph also shows that the gap in asset value between the two pension types has grown increasingly wide since late 2021. Between 2021 Q4 and 2026 Q2, DC assets grew from $9.20 trillion to $12.27 trillion, while DB assets fell from $3.68 trillion to $3.07 trillion over the same period. This disparity in asset value likely doesn't reflect differing enrollment in DC versus DB pensions.

Recent research shows that, while enrollment in DC pensions is four times greater than enrollment in DB pensions, the enrollment gap has held steady since 2013. Instead, the greater value of DC pension assets can probably be attributed to the different investment distributions between the pension types.

Employees with DC pensions want to maximize their income in retirement, so they invest in assets such as stocks, which are riskier but offer higher returns. On the other hand, employers responsible for DB pensions want to ensure they can fulfill their obligations to their former employees, so they make much safer investments into lower-return assets, such as bonds.

Higher returns bring higher risks

Households’ riskier investments in their DC pensions expose them more to the business cycle, meaning the value of their collective investments can fall during recessions. Take the Great Recession period, from 2007 Q3 to 2009 Q1, as an example: The value of DC pension assets fell 30%, from $3.73 trillion to $2.60 trillion. By contrast, the safer investments employers make for DB pensions insulate them from larger fluctuations, allowing them to grow their funds even when the broader economy contracts. Over the same example period, DB pension assets actually grew 5%, from $2.46 trillion to $2.58 trillion.

How this graph was created: Search FRED for “Private Defined Contribution Pension Financial Assets.” Select “Private Defined Contribution Pension Funds; Total Financial Assets, Level (BOGZ1FL574090055Q)”. Then select “Edit Graph,” go to the “Add Line” tab, search for “Private Defined Benefit Pension Funds; Total Financial Assets, Level,” and select the top result (which should have the series ID “BOGZ1FL574090045Q”). Click “Add data series” to add the defined benefit asset series to the existing defined contribution asset series.

Suggested by Yu-Ting Chiang and Collin Eldridge.