401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2016

EBRI Issue Brief, September 10, 2018, No. 458

56 Pages Posted: 11 Oct 2018

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: September 10, 2018

Abstract

The bulk of 401(k) assets were invested in stocks. On average, at year-end 2016, 67 percent of 401(k) participants’ assets were invested in equity securities through equity funds, the equity portion of balanced funds, and company stock. Twenty-seven percent of assets were in fixed-income securities such as stable-value investments, bond funds, money funds, and the fixed-income portion of balanced funds.

More 401(k) plan participants held equities at year-end 2016 than before the financial market crisis (year-end 2007), and most had the majority of their accounts invested in equities. For example, more than three-quarters of participants in their twenties had more than 80 percent of their 401(k) plan accounts invested in equities at year-end 2016, up from less than half of participants in their twenties at year-end 2007. Overall, more than 90 percent of 401(k) participants had at least some investment in equities at year-end 2016.

About two-thirds of 401(k) plans, covering about three-quarters of 401(k) plan participants, included target-date funds in their investment lineup at year-end 2016. At year-end 2016, 21 percent of the assets in the EBRI/ICI 401(k) database were invested in target-date funds and more than half 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.

A majority of new or recent hires invested their 401(k) assets in balanced funds, including target-date funds. For example, at year-end 2016, 71 percent of recently hired participants held balanced funds in their 401(k) plan accounts. Balanced funds made up 45 percent of the account balances of recently hired 401(k) participants at year-end 2016. A significant subset of that balanced fund category is invested in target-date funds. At year-end 2016, 38 percent of the account balances of recently hired participants were invested in target-date funds.

401(k) participants’ investment in company stock continued at historically low levels. Six percent of 401(k) assets were invested in company stock at year-end 2016, the lowest share observed in the database. This share has fallen by 69 percent since 1999 when company stock accounted for 19 percent of assets. Recently hired 401(k) participants contributed to this trend: they tend to be less likely to hold company stock. At year-end 2016, in plans offering company stock, less than one-quarter of recently hired 401(k) plan participants held company stock, compared with about 40 percent of all 401(k) participants.

Suggested Citation

VanDerhei, Jack and Holden, Sarah and Alonso, Luis and Bass, Steven, 401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2016 (September 10, 2018). EBRI Issue Brief, September 10, 2018, No. 458, Available at SSRN: https://ssrn.com/abstract=3251513 or http://dx.doi.org/10.2139/ssrn.3251513

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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