401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2012

December 2013
EBRI Issue Brief #394
Paperback, 52 pp.
PDF, 1,254 kb
Employee Benefit Research Institute, 2013

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Executive Summary

  • The bulk of 401(k) assets continued to be invested in stocks. On average, at year-end 2012, 61 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 was in fixed-income securities such as stable-value investments and bond and money funds.
  • Seventy-two percent of 401(k) plans included target-date funds in their investment lineup at year-end 2012. At year-end 2012, 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. 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.
  • More new or recent hires invested their 401(k) assets in balanced funds, including target-date funds. For example, at year-end 2012, nearly 54 percent of the account balances of recently hired participants in their 20s were in balanced funds, compared with 51 percent in 2011, and about 7 percent in 1998. A significant subset of that balanced fund category is in target-date funds. At year-end 2012, 43 percent of the account balances of recently hired participants in their 20s were invested in target-date funds, compared with 40 percent at year-end 2011.
  • 401(k) participants continued to seek diversification of their investments. The share of 401(k) accounts invested in company stock edged down to 7 percent at year-end 2012. This share has fallen by more than half since 1999. Recently hired 401(k) participants contributed to this trend: they tended to be less likely to hold employer stock.
  • Participants’ 401(k) loan activity remained steady, although loan balances increased slightly in 2012. At year-end 2012, 21 percent of all 401(k) participants who were eligible for loans had loans outstanding against their 401(k) accounts, unchanged from year-end 2011, 2010, and 2009, but up from 18 percent at year-end 2008. Loans outstanding amounted to 13 percent of the remaining account balance, on average, at year-end 2012, down 1 percentage point from year-end 2011. Nevertheless, loan amounts outstanding increased slightly from the previous year.
  • The year-end 2012 average 401(k) account balance in the database was 8.4 percent higher than the year before, but may not accurately reflect the experience of typical 401(k) participants in 2012. 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 2007) is expected to be published in 2014.