Summary
Key Findings:
- 401(k) plans draw many young and newly hired workers into saving for retirement. At year-end 2023, 41 percent of 401(k) plan participants were in their twenties or thirties, and 23 percent were in their forties. Nearly half of 401(k) plan participants had five years of tenure or less at their current employer, including just over one-quarter who had two years of tenure or less.
- More 401(k) plan participants held equities in 2023 than in 2007, before the onset of the Global Financial Crisis. At year-end 2023, 97 percent of participants held some portion of their assets in equities—through equity funds, the equity portion of balanced funds, and company stock. This compares with 87 percent of participants at year-end 2007.
- Compared with 401(k) plan participants in 2007, participants in 2023 obtained a higher share of their equity exposure through balanced funds, such as target date funds, and a lower share through equity funds and company stock. At year‑end 2023, 71 percent of participants held target date funds, with those funds accounting for 42 percent of assets. This compares with 26 percent of participants and 8 percent of assets in 2007. 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.
- On average, younger 401(k) plan participants allocate a higher share of their assets to equities than older participants. At year-end 2023, 75 percent of the assets in the EBRI/ICI 401(k) database were invested in equity securities. That equity share varies by participant age, however, from 90 percent of the assets of participants in their twenties to 61 percent of the assets of participants in their sixties.
- 401(k) plan loans are widely available, but a small share take them. At year-end 2023, 77 percent of 401(k) plan participants were in plans allowing loans, but only 15 percent of participants who were eligible for loans had loans outstanding against their 401(k) plan accounts. For those participants with loans, outstanding amounts were 9 percent of participants’ remaining account balance, on average, at year-end 2023.
- 401(k) plan account balances tend to increase with participant age and tenure. Controlling for participant age, average account balances increase with the amount of tenure a worker has at their job and, controlling for tenure, average account balances generally increase with participant age. For example, at year-end 2023, participants in their forties with two years or less of tenure had an average 401(k) plan account balance of about $24,000, compared with an average 401(k) plan account balance of nearly $400,000 among participants in their fifties with more than 30 years of tenure.