401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2010

52 Pages Posted: 24 Dec 2011

See all articles by Jack VanDerhei

Jack VanDerhei

Employee Benefit Research Institute (EBRI)

Sarah Holden

Investment Company Institute

Luis Alonso

Employee Benefit Research Institute (EBRI)

Steven Bass

Investment Company Institute

Date Written: December 1, 2011

Abstract

This paper is an update of the Employee Benefit Research Institute and the Investment Company Institute’s ongoing research into 401(k) plan participants’ activity through year-end 2010. The report is divided into four sections: The first describes the EBRI/ICI 401(k) database; the second presents a snapshot of participant account balances at year-end 2010; the third looks at participants’ asset allocations, including analysis of 401(k) participants’ use of target-date, or lifecycle, funds; and the fourth focuses on participants’ 401(k) loan activity. On average, at year-end 2010, 62 percent of 401(k) participants’ assets were invested in equity securities through equity funds, the equity portion of balanced funds, and company stock. Thirty-three percent were in fixed-income securities such as stable-value investments and bond and money funds. At year-end 2010, 11 percent of the assets in the EBRI/ICI 401(k) database were invested in target-date funds and 36 percent of 401(k) participants held target-date funds. Also known as lifecycle funds, they are designed to offer a diversified portfolio that automatically rebalances to be more focused on income over time. At year-end 2010, 44 percent of the account balances of recently hired participants in their 20s were invested in balanced funds, compared with 42 percent in 2009, and about 7 percent in 1998. A significant subset of that balanced fund category is target-date funds. At year-end 2010, 35 percent of the account balances of recently hired participants in their 20s were invested in target-date funds, compared with 31 percent at year-end 2009. The share of 401(k) accounts invested in company stock continued to shrink, falling by more than a percentage point (to 8 percent) in 2010, continuing a steady decline that started in 1999. Recently hired 401(k) participants contributed to this trend: They tended to be less likely to hold employer stock. In 2010, 21 percent of all 401(k) participants who were eligible for loans had loans outstanding against their 401(k) accounts, unchanged from year-end 2009, and up from 18 percent at year-end 2008. Loans outstanding amounted to 14 percent of the remaining account balance, on average, at year-end 2010, compared with 15 percent at year-end 2009. Loan amounts outstanding declined slightly from those in the past few years. To understand changes in 401(k) participants’ average account balances, it is important to analyze a sample of consistent participants. As with previous EBRI/ICI updates, analysis of a sample of consistent 401(k) participants (those that have been in the same plan since 2003) is expected to be published in 2012.

Keywords: 401(k) account balances, 401(k) plans, Asset allocation, Employment-based benefits, Lifecycle funds, Pension plan assets, Pension plan loans, Retirement plans, Self-directed investments, Target-date funds

JEL Classification: D31, D91, G11, J26

Suggested Citation

VanDerhei, Jack and Holden, Sarah and Alonso, Luis and Bass, Steven, 401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2010 (December 1, 2011). EBRI Issue Brief, No. 366, December 2011, Available at SSRN: https://ssrn.com/abstract=1975980

Jack VanDerhei (Contact Author)

Employee Benefit Research Institute (EBRI) ( email )

1100 13th Street, NW
Suite 878
Washington, DC 20005-4204
United States

HOME PAGE: http://www.ebri.org

Sarah Holden

Investment Company Institute ( email )

1401 H Street, NW
Research Department
Washington, DC 20005
United States
(202) 326-5915 (Phone)

Luis Alonso

Employee Benefit Research Institute (EBRI) ( email )

1100 13th Street, NW
Suite 878
Washington, DC 20005-4204
United States
202-775-6315 (Phone)
202-775-6312 (Fax)

Steven Bass

Investment Company Institute ( email )

1401 H Street, NW
Washington, DC 20005
United States

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