Summary
Key Findings:
Drawing from the EBRI/ICI 401(k) database, this paper follows a group of consistent 401(k) plan participants over a six-year period. A few key insights emerge from looking at the 0.7 million consistent 401(k) plan participants who were fully invested in target date funds (TDFs) as of year-end 2016:
- Most consistent 401(k) participants who were fully invested in TDFs remained fully invested. Among participants who were 100 percent invested in TDFs at year-end 2016, 85 percent remained fully invested in TDFs through year-end 2022.
- When moving away from TDFs, participants in their 60s were the most likely to completely exit TDFs. In contrast, when moving away from TDFs, younger participants were more likely to reduce their TDF holdings rather than exit completely.
- When moving away from TDFs, older 401(k) participants typically made larger adjustments to their equity allocations than younger participants. For example, among 401(k) participants in their 60s who moved away from TDFs, 47 percent increased their equity allocation by 20 percent or more and 32 percent decreased their equity allocation by 20 percent or more.