401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2015

EBRI Issue Brief, Number 436 (August 3, 2017)

60 Pages Posted: 9 Aug 2017

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: August 3, 2017

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 2015. The bulk of 401(k) assets were invested in stocks. On average, at year-end 2015, 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 2015 than before the financial market crisis (year-end 2007), and most had the majority of their accounts invested in equities. Nearly 65 percent of 401(k) plans, covering nearly three-quarters of 401(k) plan participants, included target-date funds in their investment lineup at year-end 2015. At year-end 2015, 20 percent of the assets in the EBRI/ICI 401(k) database were invested in target-date funds and about half 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. 401(k) participants’ investment in company stock continued at historically low levels. Less than 7 percent of 401(k) assets were invested in company stock at year-end 2015, roughly the same share as in 2012, 2013, and 2014. This share has fallen by 63 percent since 1999 when company stock accounted for 19 percent of assets. 401(k) participants were less likely to have loans outstanding at year-end 2015 than at year-end 2014. At year-end 2015, 18 percent of all 401(k) participants who were eligible for loans had loans outstanding against their 401(k) plan accounts, down from 20 percent at year-end 2014. The year-end 2015 average 401(k) plan account balance in the database was 3.8 percent lower than the year before, reflecting in large part the changing composition of the sample rather than the experience of typical 401(k) participants in 2015. To understand changes in 401(k) participants’ average account balances, it is important to analyze a sample of consistent participants. For 401(k) participants present in both 2014 and 2015, the average account balance increased by 3.1 percent. 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 2015, participants in their 40s with more than two to five years of tenure had an average 401(k) plan account balance of close to $35,000, compared with an average 401(k) plan account balance of more than $280,000 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, J32, 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 2015 (August 3, 2017). EBRI Issue Brief, Number 436 (August 3, 2017), Available at SSRN: https://ssrn.com/abstract=3015338

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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