401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2013

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 2013. 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 2013; 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 2013, 66 percent of 401(k) participants’ assets were invested in equity securities through equity funds, the equity portion of balanced funds, and company stock. Twenty-eight percent was in fixed-income securities such as stable-value investments, bond funds, and money funds. More 401(k) plan participants held equities at year-end 2013 than before the financial market crisis (year-end 2007), and most had the majority of their accounts invested in equities. For example, almost two-thirds of participants in their 20s had more than 80 percent of their 401(k) accounts invested in equities at year-end 2013, up from less than half of participants in their 20s at year-end 2007. Overall, 90 percent of 401(k) participants had at least some investment in equities at year-end 2013. Seventy-one percent of 401(k) plans included target-date funds in their investment lineup at year-end 2013. At year-end 2013, 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. At year-end 2013, nearly two-thirds of recently hired participants held balanced funds in their 401(k) accounts. Balanced funds were 41 percent of the account balances of recently hired 401(k) participants at year-end 2013. Only 7 percent of 401(k) accounts were invested in company stock at year-end 2013, the same share as in 2012. This share has fallen by 62 percent since 1999. Recently hired 401(k) participants contributed to this trend: they tended to be less likely to hold company stock. At year-end 2013, 21 percent of all 401(k) participants who were eligible for loans had loans outstanding against their 401(k) accounts, the same as in the prior four years, although up from 18 percent at year-end 2008. The average 401(k) account balance tends to increase with participant age and tenure. For example, at year-end 2013, participants in their 30s with more than two to five years of tenure had an average 401(k) account balance of nearly $25,000, compared with an average 401(k) account balance of nearly $250,000 among participants in their 60s with more than 30 years of tenure.

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, J33