401(k) Plan Asset Allocation, Account Balances, and Loan Activity In 2010

December 2011
EBRI Issue Brief #366
Paperback, 52 pp.
PDF, 1,853 kb
Employee Benefit Research Institute, 2011

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Executive Summary

THE BULK OF 401(K) ASSETS CONTINUED TO BE INVESTED IN STOCKS. On average, at year-end 2010, 62 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 were in fixed-income securities such as stable value investments and bond and money funds.

SEVENTY PERCENT OF 401(K) PLANS INCLUDED TARGET-DATE FUNDS IN THEIR INVESTMENT LINEUP AT YEAR-END 2010. At year-end 2010, 11 percent of the assets in the EBRI/ICI 401(k) database were invested in target-date funds and 36 percent of 401(k) participants held target-date funds. Also known as lifecycle funds, they are designed to offer a diversified portfolio that automatically rebalances to be more focused on income over time.

MORE NEW OR RECENT HIRES INVESTED THEIR 401(K) ASSETS IN BALANCED FUNDS, INCLUDING TARGET-DATE FUNDS. For example, at year-end 2010, 44 percent of the account balances of recently hired participants in their 20s were invested in balanced funds, compared with 42 percent in 2009, and about 7 percent in 1998. A significant subset of that balanced fund category is target-date funds. At year-end 2010, 35 percent of the account balances of recently hired participants in their 20s were invested in target-date funds, compared with 31 percent at year-end 2009.

401(K) PARTICIPANTS CONTINUED TO SEEK DIVERSIFICATION OF THEIR INVESTMENTS. The share of 401(k) accounts invested in company stock continued to shrink, falling by more than a percentage point (to 8 percent) in 2010, continuing a steady decline that started in 1999. Recently hired 401(k) participants contributed to this trend: They tended to be less likely to hold employer stock.

PARTICIPANTS’ 401(K) LOAN BALANCES DECLINED SLIGHTLY IN 2010. In 2010, 21 percent of all 401(k) participants who were eligible for loans had loans outstanding against their 401(k) accounts, unchanged from year-end 2009, and up from 18 percent at year-end 2008. Loans outstanding amounted to 14 percent of the remaining account balance, on average, at year-end 2010, compared with 15 percent at year-end 2009. Loan amounts outstanding declined slightly from those in the past few years.

THE YEAR-END 2010 AVERAGE ACCOUNT BALANCE IN THE DATABASE WAS 3.4 PERCENT HIGHER THAN THE YEAR BEFORE, BUT MAY NOT ACCURATELY REFLECT THE EXPERIENCE OF TYPICAL 401(K) PARTICIPANTS IN 2010. 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 2003) is expected to be published in 2012.