401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2014

80 Pages Posted: 30 Apr 2016

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: April 2016

Abstract

This paper is an update of the Employee Benefit Research Institute (EBRI) and the Investment Company Institute’s (ICI) ongoing research into 401(k) plan participants’ activity through year-end 2014. The bulk of 401(k) assets were invested in stocks. On average, at year-end 2014, 66 percent of 401(k) participants’ assets were invested in equity securities through equity funds, the equity portion of balanced funds, and company stock. More 401(k) plan participants held equities at year-end 2014 than before the financial market crisis (year-end 2007), and most had the majority of their accounts invested in equities. More than 70 percent of 401(k) plans included target-date funds in their investment lineup at year-end 2014. At year-end 2014, 18 percent of the assets in the EBRI/ICI 401(k) database were invested in target-date funds and 48 percent of 401(k) participants in the database held target-date funds. A majority of new or recent hires invested their 401(k) assets in balanced funds, including target-date funds. For example, at year-end 2014, two-thirds of recently hired participants held balanced funds in their 401(k) plan accounts. 401(k) participants’ investments in company stock continued at historically low levels. Only 7 percent of 401(k) assets were invested in company stock at year-end 2014, the same share as in 2012 and 2013. This share has fallen by 63 percent since 1999 when company stock accounted for 19 percent of assets. 401(k) participants were less slightly likely to have loans outstanding at year-end 2014 than at year-end 2013. At year-end 2014, 20 percent of all 401(k) participants who were eligible for loans had loans outstanding against their 401(k) plan accounts, down from 21 percent at year-end 2013, although up from 18 percent at year-end 2008. The year-end 2014 average 401(k) plan account balance in the database was 5.4 percent higher than the year before, but may not accurately reflect the experience of typical 401(k) participants in 2014. To understand changes in 401(k) plan 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) plan participants is expected to be published later this year. The average 401(k) plan account balance tends to increase with participant age and tenure. For example, at year-end 2014, participants in their 30s with more than two to five years of tenure had an average 401(k) plan account balance of close to $25,000, compared with an average 401(k) plan account balance of nearly $275,000 among participants in their 60s with more than 30 years of tenure.

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

JEL Classification: D31, D91, G11, G12, J26, J33

Suggested Citation

VanDerhei, Jack and Holden, Sarah and Alonso, Luis and Bass, Steven, 401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2014 (April 2016). EBRI Issue Brief, Number 423 (April 2016), Available at SSRN: https://ssrn.com/abstract=2772599

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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