401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2012
52 Pages Posted: 26 Dec 2013
Date Written: December 2013
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 2012. 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 2012; 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 2012, 61 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 was in fixed-income securities such as stable-value investments and bond and money funds. At year-end 2012, 15 percent of the assets in the EBRI/ICI 401(k) database were invested in target-date funds and 41 percent of 401(k) participants in the database held target-date funds. Also known as lifecycle funds, these funds are designed to offer a diversified portfolio that automatically rebalances to be more focused on income over time. At year-end 2012, nearly 54 percent of the account balances of recently hired participants in their 20s were in balanced funds, compared with 51 percent in 2011, and about 7 percent in 1998. A significant subset of that balanced fund category is in target-date funds. At year-end 2012, 43 percent of the account balances of recently hired participants in their 20s were invested in target-date funds, compared with 40 percent at year-end 2011. The share of 401(k) accounts invested in company stock edged down to 7 percent at year-end 2012. This share has fallen by more than half since 1999. Recently hired 401(k) participants contributed to this trend: they tended to be less likely to hold employer stock. At year-end 2012, 21 percent of all 401(k) participants who were eligible for loans had loans outstanding against their 401(k) accounts, unchanged from year-end 2011, 2010, and 2009, but up from 18 percent at year-end 2008. Loans outstanding amounted to 13 percent of the remaining account balance, on average, at year-end 2012, down 1 percentage point from year-end 2011. Nevertheless, loan amounts outstanding increased slightly from the previous year. 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 2007) is expected to be published in 2014.
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: Suggested Citation