The average account balance among American workers who consistently held 401(k) accounts from 1999 through 2006 increased at an annual rate of 8.7 percent, according to the latest analysis of the EBRI/ICI 401(k) database, the largest of its kind. Among this consistent group, the median, or midpoint, account balance increased at an annual rate of 15.1 percent.

• The average 401(k) retirement account rose for the fourth consecutive year in 2006. Propelled by strong stock market returns, the average 401(k) account increased 17 percent in 2006, according to the annual update of the EBRI/ICI 401(k) database. The EBRI/ICI analysis is based on the largest compilation of data on participants in 401(k) plans, which now are the primary retirement savings vehicle for the vast majority of working Americans covered by retirement plans.

• Because 401(k) balances can fluctuate with market returns from year-to-year, meaningful analysis of 401(k) plans must examine how participants’ accounts have performed over the long term. Looking at consistent participants in the EBRI/ICI 401(k) database over the seven-year period from 1999 to 2006 (which included one of the worst bear markets for stocks since the Great Depression):

   --> The average 401(k) account balance increased at an annual growth rate of 8.7 percent over the period, to $121,202 at year-end 2006.

   --> The median 401(k) account balance (half above, half below) increased at an annual growth rate of 15.1 percent over the period, to $66,650 at year-end 2006.

• The bulk of 401(k) assets is invested in stocks. On average, at year-end 2006, about two-thirds of 401(k) participants' assets are invested in equity securities through equity funds, the equity portion of balanced funds, and company stock. About one-third is in fixed-income securities such as stable value investments and bond and money market funds. These relative shares have changed little over the past 11 years.

• 401(k) participants continue to seek diversification of their investments. The share of 401(k) accounts invested in company stock continues to shrink, falling by 2 percentage points (to 11 percent) in 2006. That continued a steady decline that started in 1999. Recently hired 401(k) participants contribute to this trend: they are less likely to hold employer stock.

• New employees embrace lifestyle/lifecycle funds. Across all age groups, more new or recent hires are investing their 401(k) assets in balanced funds, including “lifestyle” or “lifecycle” funds. At year-end 2006, 24 percent of the account balances of recently hired participants in their 20s were invested in balanced funds, compared with 19 percent in 2005, and about 7 per-cent in 1998.

• Participants' 401(k) loan activity is modest. In 2006, 18 percent of all 401(k) participants eligible for loans had taken a loan against their 401(k) account. Most loans tend to be small, amounting, on average, to 12 percent of the remaining account balance.

Figure 37 19 appro It is possi ximately $ ble that these 11.242 trillio ol n de (rep r longer resenting 98 -tenure p de workers accum rcent of all assets o ulated f U.S. m DC plu an tua al fu ssets nds); th , e.g., pos ese fu sibly in a nds serv profit-s e haring are in these plans—which generally of older parti participants, the asset si Figure 33, More Recently Jack Figure 4, M Van The distributi Derhe ci, Tem ipants or tho ore Than One-Third of pon of account le Un ze f iversity, is research Hired 401(k) se with longer tenures show or many balances underscores the e offer plans is 401( Plan equit k) Participants Are d Participants Hold Balanced Funds m irector odest. y funds, bond funds, of A th ed bout 18 per e EBRI Fellows Pro more ffects of age in Their 20s or 3 mocent of the pl dest growth ( moneyg and tenure on account balances. In a funds, and balanced funds as ram.ans have assets of $250,000 0 Sarah Ho Figure 6). F ................................33 s or Have Short Job lden o is r exam senior ple, the di rector, Recently Hired 401(k) Plan Participants Are Less Likely to Hold Company Stoc Figure 34 k Figure 12 Figure 10 Figure 14 References Figure 18 Figure 42 Figure 40 apppl roxi an, m p artieo ly r t 93 o t.9 he i mn iltlrio on sh ductiareh on ool f de 40rs i 1(kn ) pl man ore t feat han ur5 es. 3. H 8 m ow ile liver on , hgene ouseral hol ly ds. such DC plan arrangements did not permit average account balance o investm or less, and another 32 per Retire given age group, shorter te Asset Allocation of Recently Hired Participants men Tenure ent options. Anot t and In ......................................................................................................................... vestor Research, at th hf cent have plan e participants in their 60s r 26 percent of participant nure tends to e Invest assets between $250,001 and m mean that ent Com in ps an creased 29 percent (a 3.7 p a higher percentage of par ar y In e in plans that offer GICs and/or other stable value stitute (ICI). Craig Copelan $1,250,000 (Figure 2). ticipants will have account ercent annual average d is sen .................... ior research 9 Recently Hired Participants Now Hold Tenure Composition of Selected 401(k) Account Balance Categories Percentage of recently hired participants offered and holding company stock by age,1998–2006 Ratio of 401(k) Account Balance to Salary for Participants in Their 20s, by Tenure 401(k) Account Balances Less Than $10,000, by Participant Age and Tenure Distribution of 401(k) Account Balances, by Size of Account Balance Figure 44 Figure 34, Recently Hired Loan Balances as a Percentage of 401(k) Account Balances Participants Now Hold Higher Concentrations in Balanced Funds............34 5 Bloomberg Data. New York, NY: Bloom Percentage of 401(k) Plans Offering Loans, by Plan Size, 2006 berg, L.P. Figure 6 employee contributions and often were designed to be supplemental to other employer plans. These participants’ associate and Luis Alonso is research analyst at EBRI. Special thanks to Elisabeth Buser at EBRI and Carolyn Bennett This update extends previous findings from the project for 1996 through 2005. For year-end 2005 results, see Holden funds as an invest growth rate) between y balances of less than $10,000. For ment option, in addition to the “base” op ear-end 199 Higher Concentrations in Balanced Funds 9 an exampl d year-end 20 e, 88 percent of participants in th 06 (Fig tions. Alt ure 6). Investment returns, rather than annual ernatively,eir 20s with two or fewer y 13 percent of participants are ears of Figure 9 Comparing snapshots of newly Percentage of participants with account balances in specified ranges, 2006 hired 401(k) plan Percentage, 2006 Figure 8 Figure 3 participants’ asset allocations provides further insight Percentage of participants with account balances less than $10,000 at year-end 2006 Percentage of participants with account balances in specified ranges, 2006 Loan Balances as a Percentage of 401(k) Account Balances for Participants With 401(k) Plan Loans, by Plan Size, 2006 Figure 5, Age Group 401(k) Account 1998 Balances In 1999 cr 2000 ease for Fourth C 2001 Figure 5 onsecutive Year 2002 2003 .......................................... 2004 2005 200611 account balanc Brady, Peter, Percentage Change in Average Account Balances Among 401(k) Participants Present es and Sarah Holden. “The U.S. Retire that predate the 401(k) plan are not included in this a ment Market, 2006.” nalysis, wh ICI Resea ich focurch Fundamentals ses on 401(k) balance , Vol. 16, Introduction an at ICI, d Va w nD ho erh helped ei (Aug foust 200 rmat the 6 an figd Aug ures. ust 2006 —Appendix). Results for earlier years are available in earlier issues of a,b 24 Figure 35, Asset Allocation Distribution Relationship of EBRI/ICI Database Plans to the Universe of All 401(k) Plans EBRI Issue Brief of Account Balan Figure 4 ce to Balanced Funds Among Recently in plans that contributi tenure have account balances of less than ons, generally offer comp account f any stock, b or m ut n ost o stable value products, wh of $10,000, com the growth in accounts pared with 53 percent ile the rem with larger balances. aining 3 of participants in their 20s wi 4 percent of In ad 93% dition, th 70% 100% Percentage of recently hired participants holding balanced fund assets, Snapshot of Year-End Account Balances 1998, 2005, and 2006 into the recent investment allocation activity EBRI/ICI Database Represents Wide Cross-Section of 401(k) Universe of plan participants. Lifestyle and lifecycle funds, which are 20s Domestic Stock Market Continues Recovery From Bear Market 60.8% 3% for Participants With Loans, by Participant Age, Tenure, 61.1% 60.5% 58.1% 53.9% 49.6% 49.8% 45.4% 40.0% a b amount no. 3 s. , July 401(k) Account Balances Increase for Fourth Consecutive Year 2007. Available online at http://www.ici.org/stats/res/fm-v16n3.pdf 5% 90% 13 EBRI Issue Brief (http://ebri.org/publications/ib/) and ICI Perspective (www.ici.org/perspective/index.html). 15% From Year-End 1999 Through Year-End 2006, by Age and Tenure, 1999–2006 Figure 20 participants are offered both com participants in their 60s Figure 6, Per between five and 10 Hired Participants, by The 2006 EBRI/ICI database is a representative sam centage Chan 5%y have a hi ears Age ge in Average Account Balances Am of tenure (Fig ..................................................................................................... p gher pr any stock and stable opensit ure 14). Olde y to make withdrawals. value products, in addition to the p r workers display a si le of the estimated universe of 401( ong 401(k) Parti a milarc pattern. For ipants Present b base options. k) pla .........34 exa nm s. At ple, 64 Over the past two decades, More Than One-Third of 401(k) Participants 401(k) plans have grown to be the most widespread private-sector employer- This Issue Brief was written with assistance from the Institute’s research and editorial staffs. An 87% y views expressed in included in 30s balanced funds, have increased in popular 61.9% Percenta 62.3% ge of Account Balance Invested in Balanced Funds Amon 61.6% 60.0% ity. More recentl 57.2% 53.3% y hired g Those Holdin 52.3% participants hold balanced g Balanced Fund 47.6% 43.6% s 20 401(k) plan characteristics by number of participants: Account Size, or Salary, 1996, 2000, 2005 or 2006 86% 14% a b 6 401(k) plan participant account balances, 1996–2006 The 38.5% ratio of 401(k) account balance (at the current employer) to salary alone is not an indicator of preparedness for Cerulli Associates. “Retirement Markets 2006.” Issue Brief Cerulli Quantitative Update. Boston, MA: Cerulli Account balaTenure nces are net of 401(k) account balances unpaid loan balances. Thus, u among 401(k) participants npaid83% loan balances are not included in any of the eight asset 1999 to 401(k) Plan Assets Concentrated in Equity Funds 2000 to 2001 to 2002 to 2003 to 2004 to 2005 to 1999 to From 90% Year-End 1999 Through Year-End 2006, 11% by Age and Tenur 1998 e, 1999–2006 .........................12 year-end 2006, 401(k) pla percent of participants in their 60s with t sponsored retirem 40s 59.8% ent plan in the United ns held $2.7 t 60.6% rillion in assets 59.5% States, and no wo or fe 58.8% wer years of tenure have account balances of less than , and the E w serve as the 55.9%BRI/ICI database represents about 46 pe 52.6% most popul 52.0% ar defined contributi 47.3% 43.6%on (D r- C) 300 this report are those of the authors, and should not be ascribed to the officers, trustees, or other sponsors of EBRI, 14% Are in Their 20s or 30s or Have Short Job Tenure funds (Figure 33) and are These changes in participant account ba 60% more likely to hol lances refl d a high ect concentration of their accounts in balanc changes in stock values during the seven- ed funds year time 11% EBRI/ICI database vs. Cerulli estimates for all 401(k) plans, 2006 >5–10 Years Figure 36, Average Asset Allocation of 401(k) Accou 1996 80%nts, b2000 y Participant Age and 2005 Investm 2006 ent Age Group Asset Allocation by Investmen retirement. A co (years)mplete analysis of prep t Options and Age, Salary, and Plan Siz aredness fo a r retirement wou b ld require estim aating projected balances e at Age Group 2000 >0–50 percent 2001 2002 >50–90 percent 2003 2004 >90 percent 2005 2006 2006 categories desc Associat ribe es, I d. nc., 2006. Figure 16 $70,000 present from year-end 1999 through year-end 2006 50s 57.6% 58.8% 13% 57.4% 57.9% 53.9% 51.2% 49.5% 45.2% 42.3% EBRI-ERF, oDomestic Stock Market Indexes r their staffs. Neith 401(k) plan average asset allocation, percentage of total assets, er EBRI nor EBRI-ER , Month-end Level F lobbies or tak , eDecember 1996 to December 2006 s positions on specific po selected years licy proposals. EBRI cent of that total. The $10, plan, represe 000. In cnting the largest num ontrast, onl year-end 2006 EB y about 20 ber of percent of those i RI/ICI databa participants a se also covers nnd assets. In their 60s wi 40 percent of the universe of active 2006, 50 m th more than 20 illion Am years of tenure have erican workers were period. The stock m (Figures 34 and 35). In addition, at arket returns posted in 2006 m year-end 2006, ark the fourth consecutive y 24 percent of the account balances of recentl ear of positive returns y hired 20s Percentage of 401(k) plan participants by age or tenure, 2006 84.9% No. 308 7.3% 7.8% 20s 7 Figure 7, Ave ret Options Am irement by All al orng Participant so c age Account Balances Am onsideri 95.0% ng ret s With irem46.0% ent Two or Fewer Years of Tenure incom ong 401(k) e from 20.2% Soci Partic al Secu 59.4% ipants Present Fro rity, de...............................................35 fined 30.7% benefi mt Year-End 1999 pl 21.9% ans, IRAs, a27.0% nd othe r DC 1004.3% plans, $140,000 As discussed above, asset allocation vari All a es with partic 16% Average ipant age. Thus, Figure 23 14% b 13% presents the analy 12% sis of 80% 1 18 12% Thi Esm sy ploy stem 60s ee Benefit Research Institute. “ of classifi 54.1% cation doe55.5% s not consi53.6% der H t is htory e nu m 55.7% of 401(k) Plans: An Update,” ber of dist 51.0% inct investm 49.5% ent opt 12% io 47.8% n FACTS from EBRI s presen 12% t43.9% ed to a give 40.4% . n 12% Figure 25 12% 12% invites comme 53% Median Account Balance nt on this research. Among Long-Tenured Participants, by Age and Salary, 2006 401(k) account balances of less than $10,000. EBRI E plan participants and 12 mploye Plan Assets 30s e Benefit Research Instit percent of all 401( ute Iss 86.0% ue Brief (ISSN 08 k) 87plan -137s. The dis X) is pu 7.6% blished m tribution of a onthly by the E ssets, particip mployee B 6.4% enefitants, and plans Research Institute, active 401(k) plan participants. By year-end 2006, 401(k) plan assets 70% had grown to represent 16 percent of (whether participants in their 20s is measured by >5–10 the 108.7% Standard and invested in ba 52.2% Poor lanced funds ’s (S&P) 500 22.8% , co or the R m 62.1% pared with 19 ussell 2000 i 32.9% percent in 20 ndices), following the t 22.8%05, and 26.8% about h7 percent ree- 1208.6% 50% $61,346 possibly from previous employment. For recent references to such research, see Holden and VanDerhei (July 2005). Through Year-End 2006, by Age and Tenure, 1999–2006.............................................................12 asset allocati Allon by investment options Age Group 49% 60.5% 61.0% and also by 60.0% 58.7% participants’ 55.3% age. Salary Tenure 51.6% information is available for a 51.0% 46.3% 42.0% 2121 K Street, NW, Suite 600, Washington, DC 20037-1896, at2 $300 per year or is included as part of a membership subscription. participant, but40s rath 48% er the types of options 84.1% presented. Preliminary research 8.9% analyzing 1.4 million 7.0% p 28% articipants drawn Washington, DC: Employee Benefit Research Institute, February 2005. 250 (percentage of plan assets) Average Asset Allocation of 401(k) Accounts, Average Account Balance Figure 37, Recently Hired 401(k) Plan Participants Are Less Likely August 2007 to Hold Company Stock ...........36 in the EBRI/ICI database f all retire In a given age group, ment asset 46% s, with $2.7 trillion or 2006 is similar to that longer tenure tends to mean th in assets. In an ongoing collaborative effort, the Em reported for the universe of plans as esti at a higher percentage of participants will have m$58,328 ated by ployee Benefit Cerulli 30s 21 All 15.3% 64% 12.4% 0.7% Participant Age Group 48.6% 25.6% 17.7% 23.8% 255.2% S&P 500 23% Th year bear mar is am repo ong that age group 44%rt is bein ket of 2000–2002 (Fi g publish in ed si 1m 998 (Fi ultangure 8). For exam eo gure 3 usly as an 6). A sim EBRI Iss ilar ple, the S&P 500 total return 30% upattern occurs across e Brief and ICI Perspective all age groups. an index increased 15.8 d is available on both per- $60,000 Periodicals po 50s stage rate paid in Washington, D 81.1% C, and additional mailing office10.7% s. POSTMASTER: Send address8.2% changes to: EBRI Iss $121,202 ue The t Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. endency of 20s the account balance-to-salary 30% ratio to peak 30% at higher salary lev 24%els and then $56,878 23% fall off likely reflects the 70% By Age fr subset of participants in the 2006 EBRI/ om the 2000 EBRI/ICI database suggests tI hCI datab at the shee ase. r nuBecause asset mber of investm allocati ent option is influenced by the ons presented does not influence 3 >30 Years 4 $55,502 by Participant Plan Size and Investment Options 1996 1999 2002 2004 2005 2006 Holden, Sarah, Peter Brady, and Micha Figure 8, Domestic Stock Market Con 100 40% >5–10 40.4% 27.2% tinues Recovery From el Hadley 9.4% . “401(k) Plans: 56.9% Bear Market A 25-Year R 30.2%......................................... etrospective,” 21.3% 26.0% ICI Perspect 14 510.3% ive, Associat account balances great es (Figure 3). er than $100,000. For example, about 11 percent of participants in their 60s with 10 or Rese Brie Salary Range f, 2arch Inst 121 K S 60s treet, N itute (EBRI) W, Suite 600 and the Inves , W20s ashingt 77.0% on, DC 200 tme 37 nt Co -1 30s 896. C mp op any yright 2 Institute (I 12.4% 00740s by Employ CI) ee B collect an enefit R 50s esea nual data on 10.6% rch Institute. A60s ll ri millions of ghts Note: The analysis includes 401(k) plan participants with two or fewer years of tenure in the year indicated and a plan offering company stock as an or cent in 200 $120,000 ganizations 6, ’ Web after rising 4.9 percent in 2 30s sites at www.ebri.org and 005. Si ww 22% w.ici. nce or y gear-end 2002 20% , the S&P 500 t 19% otal return in 19% dex has Figure 38, influence Fewer New Participants Hold Hi of two competing forces. First, empi gh Concentrations in Com rical research (see Holden an pany d V St anD ock erh.............................36 ei (October 2001) for a complete 40% Comparing recently hired participants in 2006 with their similar age groups in 1998 also illustrates that part invest icip m ae nnt options available to participants, Figur ts. On average, participants have 10.4 distincte 24 presents ass options but, on aveerage t allocation by salary , choose only 2.5 (H range and by olden and a reserved. No>10–20 . 3 All08. 6.8% 84.5% 5.8% (Median Age: 44 Years) -3.9% 43.6% 8.2% 22.5% 15.2% 7.3% 22.2% 168.9% investment option. $51,569 Vol. 12, No. 2 (Investment Company Institute, November 2006). >20–30 Years 54% fewer y $20,000–$40,000 ears of tenure have account balances in excess $6,719Percentage of account balances, $22,839 of $100,000 ( $58,957 2006 Figure 15). H $76,788 owever, about 43 percent of $66,147 401(k) plan participants as 40s a means to accurately 16% portray 15% how these participants manage their 13% 13% accounts. Figure 23 clim dibed 73.3 scussi 60%on of percent and the Russell 2000 total EBRI/ ICI findings and others’ resea retur rch o nn index the relhas more than do ationship between c ub ont led. ribution rates and salary) VanDerh Figure 9, S ei (May 2 napshot of Y 001)). In adear-End Account dition, the prelimin Balances ary an $49,024 alys.............................................................................. is found that 401(k) participants are not naïve—that is, 15 asset allocation to company stock and equity funds is lower now than in 1998, while asset allocation to fixe 51% d- 200 40s investment options. All 2.5% 0.9% -6.4% 36.8% 2005 19.7% EBRI/ICI 13.3% 20.1% 115.9% $103,952 Figure 24 ® ® 80 Figure 39, Asset Allocation Distribution $50,000 401(k) Plan Asset Allocation, Account Balances, and of Recently Hired Participant Account Balance to Holden, Sarah, and Jack VanDerhei. “4 >$40,000–$60,000 50s $47,004 $16,393 01(k) Plan As 12% $38,693 set11% Allocation, Account Balances, and Loan Activity $78,834 10% $99,932 10% $97,588 in Not The Typical 401(k) Plan Participant participants in their 60s wi e: Th This report is e electronic vean update of rsion of th th between 20 and 3 is pu EBRI and ICI’ blication was creat s ongoi 0 y ed ear usi s of tenure with their current em ng re ng ver search into 401(k) plan pa sion 6. >10–20 Years 0 of Adobe Acrobat. rticipants’ ploy Ther h ose ha a activit ve account ving y b suggests th Average Asset Allocation of Accounts, by Participant Age and Investment Options at higher earners tend to contribute higher percentages of salary; therefore, one would expect the ratio of The Em Equity ployee Benefi Balanced t Research Institut Bonds e (EBMoney RI) was founded in 1978. Its Company mission is to when given “n Age Group ” o >5–10 ptions, they24.9% do not di >0–50 percent vide 16.8% their assets am 4.3% ong al >50–90 percent l “n.” 49.4% Indeed, le 27.2% ss than 1 percent 19.4% >90 percent of parti23.9% cipants 327.8% 20s GICS /Stable income securities tends to increase (Figure 36). Recently hired 401(k) participants are less likely to hold Participant as 30% set allocation also varies with plan size (Figure 25, top panel), but much of the v ® ariation ® Average Asset Allocation of 401(k) Accounts, by Participant Salary and Investment Options 5 >2–5 Years 60s Figure 10, Distribution Company Stock in 401(k) 60s of 401(k) Account Ba Plans With Com 10% pany lances, Stoc by k, by Age Size of Account Balance 9% ....................................................36 8% ............................. 8% 17 $100,000 >60,000–$80,000 $39,383 $71,897 $43,215$132,531a $94,568 $163,935 $160,051 trou balances greater than $100,000. T b The EBRI/ICI database includes 401(k) le op 2005 50% enin .” g 20s th EBRI Issue Brief e PDF 43% document will n , no. 29 h 47.5% eis incr ed 6; and to upg participants of eases to 45 pe ICI Perspe rade their co ctiv rcent fo m a wide range of age and t p e, u 11.9% Vol. 12, ter to th r participants in their 60s with more than e cu norren . 1 (Em t versio ploy n of enure. Fift e 40.6% e Benefit Research Adobe y Reader, -five percent throug account h y balanc ear-end e to salary t 200 26%6. o The report is divided into five rise with salary. However, tax code sections contri: The first describes the EBRI/ICI 401(k) bution limits and nondiscrimination rules, which >10–20 19% 19% 1.9% contribute to Funds 0.6%, to encourag Funds -7.1%e, and to enhanc Funds 37.1% 20s >5–10 Years e the developmen Funds 19.7% 13.2% t of sound empl 20.2% Stock oyee ben 112.6% efit followed a “1/n” asset allocation strategy. Value Percentage of account balances, 2006 $41,156 Figure 38 company stock (Figure 37) and less likely to hold a high concentration of t a heir account balance in company can be explained by Loan Activity in 2006 differences in the investment options offered by plan sponsors. For example, the 60 16% 16% 16% 30s 55.5% 12.3% $39,885 32.2% 15% Percentage of account balances, 2006 34% which can be downloa Tenure (years) ded for free at www.adobe.com/products/acrobat/readstep2.html 8 >$80,000–$100,000 Institute and I >20–30 nvestm -0.9% ent Com $56,194 programs and so p-2.5% any Institute, August 2006). und public policy $114,298 -8.4% through objective 32.3% $196,592 17.0% resear $243,382 ch and 10.9% education. EBR 18.3% $237,303 I is the only 79.6% of participant 30 yPlan Size by Number of Participants ears of tenure. s are in their 30s or 40s, while 12 percent of participants are in their 20s and 8 percent are in database; the second focuses on changes in participan 13% 13% t account balances over time, analy 13% zing a group of aim to ensure that employees of all income ranges attain the benefits of the 401(k) plan, constrain t bhese high-income 150 12.5% 12% Figure 40, GICs Figure 11, are ins Percentage of 401(k) Plans O u40s Age Com rance compposition of Selected any products that 53.5% ffering Loans, by guara 401(k) Account Bala ntee a specific rate 33% Plan S 12.8% of ize, 2006 nce Categories return >2–5 Years on th .........................................37 e invested .................................... cap 33.6% ital over the life of t 17 he $40,000 $37,323 11% 11% 11% 11% 11% stock (FigureFewer New Participants Hold High Concentrations in Company Stock s 38 and Figure 39). Equity Balanced Bonds Money GICs /Stable Company percentage of plan assets invested in company stock ri 10% ses with plan size. A portion of this trend 10% 10% occurs $81,665 c 20% 40% 0–2 private, nonprof27% 9% it, nonpartisan, Washington, DC-b 24% 9% ased organi 23% zation com 21% mitted exclusively to 50s All 0.5% -1.4% -7.1% 30.8% 16.4% 10.5% 17.2% 81.5% W >$100,000 All Plans ho we are $57,794 $163,769 $290,349 $367,413 $350,576 By Jack VanDerhei, Temple University and EBRI Fellow; Sarah Holden, ICI; Craig Copeland GICs /Stable their 60s (Figure 4). The median age of the participants ________. “ in consistent 401(k) participants; the third dividuals’ abilit 50sAppendix: A y to save in dditional Figures for the EBRI/I the p Equity lan50.2% . 8% 7% presents a sn Balanced in the 2006 apshot of 7% Bonds CI Participant-Directed Retirement Plan Data 13.4% participant account balances at EBRI/ICI dat Money abase is 44 y 36.4% 10.1% ears, the sa year-end 2006; Company me contract. 6% 5% 5% Year-En 40 d 2006 Snapshot of 401(k) Participants’ Account Balances Relationship Betw >2–5 Percentage of recently hired participants offered company stock holding the een Account Balances and Salary Funds 24% Funds 25% Funds 0–2 Years 21% Funds 20% Value Funds 4% 4% 4% 4% Stock because fe $80,000 Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. b w s >5–10 mall plans offer co 24.1%public mpany poli 15.2% stcock as an invest y research 4.6% and edu ment option. For exam cat45.1% ion on econo 26.5% mic securi ple, less than 1 percent of ty 19.1% and employee 23.3% benefit iss303.3% ues. 60s 44.2% 8% 12.4% 43.4% 22 27% 1–100 8.0% 55.5% 20.1% 9.0% 6.5% 7.5% 0.1% Figure 41, Figure 12, Percentage of Eligible 40 Tenure Composition of 1(k) Selected Plan Participants With 401(k) Plan Loa 401(k) Account Balance Categories ns, by ............................... Plan 18 9 Salary as in 2005 Collection Project for Year-End 20 . Thirty-three percent of the p Funds articipants have 05.” Funds ICI Perspe five or fewer y c 12% tiv Funds e. Vol. 12, ears of tenure, while 6 no. 1A (Investment Com Funds Value Fundspercent have pany Stock 7.4% Institute, and Luis Alonso, EBRI the fourth l a ooks at participants’ asset allocations; and the fifth looks at participants’ 401(k) loan activity. At year-end 2006, 62 percent of balanced mutual fund assets were invested in equities (see Investment Company Ot her st Account balances are based on administrative records and cover the account balance at the 401(k) plan participant's current emp able value funds include synthetic GICs, which consist of a portfolio of fixed-incom loyer. Retirement savings held in e securities “wrapped” All >5–10 EBRI’s member 51.5% 23% ship includes a cross-section of 21% 12.4% pension funds; businesses; trade associations; 19% 36.1% 18% Investment Options, All Ages >10–20 percenta $67,956 3.4% ge of their account balance indicated in com 5.9% 1.9% -6.5% 33.7% p19.3% any stock, 1998–2006 13.2% 19.3% 112.2% participants in small plans are offered co Participants’ 30% $67,760 account balances vary mp not anyonl stock y with age as an investment optio and tenure, but also with salary n, while 69 percent of . Figure 16 reports 101–500 56.1% $67,258 16.9% 10.9% 5.8% 7.3% 0–2 Years 0.7% In an Size, 2006 10%y given ..................................................................................................................... year, the EBRI/ICI database provides a snapshot of the 401(k) account balances at y ..................37 ear-end, $30,000 Plans Without Company Stock, GICs/Stable Value Funds plans at previous employers or rolled over into individual retirement accounts (IRAs) are not included. Account balances are ne 4.5% t of loan balances. 100 mor In e than 30 stitu August 20 te, Qu yart ears of tenure. The media erly Supp 06) b . Online appendix availabl lemental Data). n tenure at the e at http://www.ici.org/stats/res/per12-01_appendi b current empb loyer is eight c years, also the sax.pdf me as in b with a guarantee (typically by an insurance comp Russell 2000 any or a $62,585 bank) to provi 2006 de benefit payments according to the plan at Figure 13, Account Balances Incr No GICs/Stable Value or Company Stock >20–30 >10–20 -1.1% labor un ease -3.3% ions; h With Age and Tenure e15% alth car -8.3% 3.6% e providers and insur 14% 29.3% .............................................................. ers; government org 15.2% 13% 9.6% anizations; 13% and service firms. 16.7% 18 67.0% 20 Equity Funds Company Stock Balanced Funds 58.1% 17.3% Bond Funds 14.4% GICs and Other Stable 7.4% Money Funds 25 b 3.0% 30s % 501–1,000 23.8% 54.4% 16.2% 10.7% 5.2% 7.8% 2.4% participants in plans with the account balances of long-tenured par more than 5,000 participan 50s ticipants at ts are offered their current em co 2.5% mp ploy any stoc ers’ 401(k) plans. R k as an investment option. e Cerulli tirement Long-tenured participants are used in this analysis to capture as long a work and savings history as possible. The tenure variable tends to be years with the current 23 Year-End 2006 S 32% n23.2% apshot of 401(k) Plan Loan Acti 2.1%vity which reflect $20,000–$40,000 s the entrance of new plans and new par 51.8% 25.6% ticipants and the exit of part 14.2% 6.6% icipants who retire or 1.9% Age Group >0–50 percent >50–90 percent Value Funds>90 percent 60s 2005 . • The average >30 >20–30 401(k) -2.0% retirement account rose fo -3.5% 11% -8.0% 10% 27.6% r the fourth c 13.1% 9% onsecutive year in 2006. 7.0% 18% 9% 14.0% Prop53.2% elled book ____ GICs/Stable Value, But No Company Stock v Particip alu ___ e. _. “T ants in he Influence of Autom their 20s hold approxim aa tic tely 54.1% Enrollm 2 percen en t t, Catch-Up, and IRA Contributions o15.4% f the total assets in 5.9% the 200 3.4% 6 EBRI/ICI d 17.7% on 4 atab0 a1 se (k) ; participants employer rather than years of participation in the 401(k) plan. Particularly among older participants, job tenure may not refl 15% Share of Participants' Account Balance ect length of participation in the 401(k) plans; Figure 42, Loan Balances as a Percenta $60,000 20% ge of 401(k) Account Balances for Participants With 401(k) 4% 1,001–5,000 51.5%22.7% Investment Category 14.5% 10.0% 4.7% 9.4% 6.2% Thus, to anal savings held y 20s ze the p at previous em otential effect of ployers or am 40.1% plan size, the rem ounts rolled over to IRAs are not inclu aining panels of Figure 13.7% 25 gr ded in the ana oup 46.2% plans bly y sis. To >$40,000–$60,000 55.3% 22.3% 14.2% 6.4% change jobs. Figure 14,At y 401(k) Account ear-end 2006, t Bala he average account ba nces Less Than $10, lance was $ 000, by Participant Age and 61,346 and the me Tenure dian account .................. balance 20 10 the regulations for the 401(k) plans were introduced about 26 years ago. EBRI’s work advances knowledge and understanding of employee benefits and their 60s 0% All >30 -3.2% -4.0% 7% -8.5% 8% 22.5% 9.6% 8% 3.7%7% 9.3% 29.3% in Company Stock, But No GICs/Stable Value their 30s hold 12 percent; participants in th 44.3% eir 40s hold 32 10.6% percent; p 13.5% articipants in 7.7% thei Held in Company Stock r 50s hold 38 percent; 21.1% and Accu by m u strong lations at Retirement.” stock market returns, the ave EBRI Issue Brief 24% rage 401(k) a , no. 283; an ccount increased 17 perc d ICI Perspectiv 40s e, Vol. ent in 2006, 11, no. 2 (Employee Some ad 0 ministrators supplying data were unable to provide complete asset allocation detail on certain pooled asset Availability and Use of 401(k) Plan 21.3% >5,000 46.5% Loans by Plan Siz 11.0% 7.7% e 3.7%30s 12.4% 15.4% EBRI/ICI 401(k) Dat Plan Loans, by Plan Size, 2006 Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. 30s abase ................................................................................................. 47.7% 12.8% 39.5% .....38 $20,000 >$60,000–$80,000 59.1% 18.8% 13.7% 6.0% investm capture as long a savings hi ent options and plan size. story as possible, only long-tenured participants are included in this analysis. 50 a >5–10 23.3%importance to 14.8% the nation’s econo 4.5% my 40.5% among policy 24.4% makers, the news 16.1%media, and 19.2% the public. It 258.3% was $18,986 (Figure 9). Because of the changing composition of the universe over tim 6% e, it is not correct to 1% All Categories (Equity, Balanced, Bonds, 25% 50s paMinor investment options are not shown; therefore, percentages do not add to 100 percent. Percentages are dollar-weighted avera rticipants in their 60s hold the remaining 14 percent of the total assets. ges. 10% 40sAccount Size 46.0% 13.1% 40.9% classes fo Benefit Research Institute and Invest r on Allaccording to the annual update of the EBRI/ICI 401(k) database. The EBRI/ICI anal e or more of their clients. Th 49.1% e final EBRI/IC ment Com 12.9% I dp aany tabase i Institute, Jul 8.6% ncludes on 4.3% y ly 2005). plans for w 11.0% hich at least 9 11.1% 0 y perce sis in st based of Changes in 401(k) Participant Figure 15, 401(k) Account Balances Greater Than $100,000, by s’ Account Balances Participant Age and Tenure ............20 >$80,000–$100,000 <100 participants 61.3% 100–500 16.1% 501–1,000 14.0% 1,001–5,000 5.5% >5,000 b >90% Fifty->10–20 one percent of the 401(k) plans for which loan 4.3% does this b 0.9%y conducting -5.2%and publishing policy re data are av 29.3% aila 16.5% ble in the 2006 EBRI/ICI database search, analysis, 10.2% and special reports on 13.8% 88.4% However, it is important to note that the tenure variable is the time that individuals have been at their current 24 Money, GICs/Stable Value, Company Stoc “Funds” include mutual funds, bank collective trusts, life insurance separate accounts, and any pooled investment product prima 50s 43.3% k 43.8% 10.2% 13.3% 5.1% 1.9% rily invested in the security indicated. 43.4%17.4% 18.5% Figure 43, Percentage of Eligible Partic Sources and Type of Data ipants With 401(k) Loans, by Participant Age, Tenure, presu Tabl me of e that Contents the change in <$10,000 the average or median 39% account balance for database as a whole refl 39% 35% 35% ects the Plans Without Company Stock, GICs/Stable Value Funds al 20 l pl $40,000 an asset Lifestyle funds m s could be i ad intain a predeterm entified. ined risk level and generally use words such as “conservative,” “moderate,” or Less Than $10,000 >$40,000–$50,000 More Than $100,000 c on the largest compilation of data on participants in 401(k) plan 25 s, which now are the primary ________. “ >$100,000 Can 401(k) Accu 64.0% mulations Genera 15.3%te Significant Income for Future Retirees?” 13.1% 5.6% EBRI Issue Brief, >20–30 -1.8% employee benef -3.3% its issues; holding educational br -8.0% 23.5% iefings for EBRI memb 10.7% 4.6% ers, congressional and 9.7% 36.9% W GICs are guaranteed investment contracts. hat we do 60s 39.5% 12.6% 47.9% Distribution of Equity Fund Allocations jobs and m offer a plan loan prov ay not reflect the length of ision to participant time they s (Figure 40). and Participant Exposure to Equities have pa The loan feature is rticipated in a 401(k) mo plan re co (particularly mmonly associated with among older The EBRI/ICI database is constructed from the administrative records of 401(k) plans. The database 11Plans Without Company Stock, GICs/Stable Value Funds Figure 16, 1–10 Me11–25 dian Account Balance among L $10,000–$20,000 26–50 51–100 101–250 32% ong-Te 251–500 nur 501–1,000 32% ed Participants, b 1,001–2,500 29% 2,501–5,000 y Age 5,001–10,000 and Salary 28% >10,000 , 2006 All Plans ...24 experience of “typical” 401(k) plan Account Size, or Salary, 1 Several EBRI and ICI members provided 1–100 996, 2000, 2005, or participants. 58.4% records on ac 18.9% 2006 ......................................................................38 11.8% tive participants in 401(k) 9.4% plans for whi >50–90% ch they 0% “aggressive” in their name to indicate the fund’s risk level. Lifecycle funds follow a predetermined reallocation of risk $10,000 All 43.9% 13.3% 42.8% Whe All n analyzi>30 ng the change -6.2% in acc58.1% ount ba -6.2% lances ove 17.3% -10.2% r time, it is i 14.4% m 19.2% portant to ha 6.0% 7.4% ve a consiste 0.2% nt sample. C 6.7% omparing 6.8% no. 251; and ICI Perspecfederal agen tive, Vol. 8, no. cy staff, and th Size of Account Balance 3 and (Em e news ploy media; ee Benefit Resear and sponsoring public opinion survey ch Institute and Inves s on emplo tment yee retirement savings vehicle for the vast majority of working Am 19 ericans covered by retirement 0 large plans (as measured by the number of participants in the plan). Ninety-three percent of plans with more participants, as 401(k) pla The year-end 1–100 Age Group >$20,000–$30,000 2006 EBRI/ ICI database fi 0–2101–250 ns were only 251–500 20s >2–5 501–1,000 introduced ab 55.1% 28% nds that, on >5–10 1,001–2,500 16.7% 23.3% out 2 average, 49 pe 28% 6 2,501–5,000 y >10–20 ears ago). 11.7%rcent of participant account balances 5,001–10,000 25% 8.0% >20–30 >10,000 25% >30 All Plans contains onl 101–500 Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. y the account balances held i 58.3% n the 401(k) 17.6%plans at participants’ 14.5% 7.6% current employers. Retirement kept records at year-end 2006. These plan recordkeepers include mutual fund companies, insurance over time to a specified target date, and typically rebalance their portfolios to become more conservative and income- average accounParticipants t balances across differen benefit issues. t year-en EBRI’s Ed d snapshouc ts can ation and Re lead to false con search Fc und lusion (EBRI-ERF) performs s. For example, the add the char itio itn able of, All Plans With GICs/Stable Value Funds There is wide variation in a All 13.5 0.3% 401(k) plan pa -1.0% rticipants’ -6.9% account balances at y 30.5% 15.8%ear-end 9.9% 2006. Nearly 16.6% three- 78.9% Dec-96 Dec-97 Dec-98 Dec-99 11.6 Dec-00 Dec-01 Dec-02 15.9% Dec-03 Dec-04 Dec-05 Dec-06 Introduction Figure 17, Comp The analysis includes the 0.4 million recently hired participants (those with two or fewer years of tenure) holding balanced f ................................................................................................................... any Ratio of 401(k) Institute, November 2002) Account Bala 12.9 nce to Salary . Number of Participants in Plan , by Age and Tenure ........................................ ........................ unds in 1998; the 0.9 5 24 Figure 44, Loan Balances as a Percentag plans. e of 401( Size of Account Balance k) Account Balances for Participants With Loans, Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. >$30,000–$40,000 30s 64.8% 23% 16.6% 24% 11.4% 22% 5.3% 22% Years of Tenure Salary Range than 10, 501–1,000 000 participants include a loan p 56.7% rovision, co 17.9% mpared with 27 percent of plans with 10 or fewer 15.7% 7.2% are allocat savings held i Older, longer ed to equity funds (Figure 20). Howeve n plans at previous em -tenured, and higher-i ployers or rolle ncome participants tend to Number of Participants in Plan r, individual asset allocations vary d o 30% ver into individual retirem have larger account balances, which are ent accounts (IRAs) are not widely across $20,000 co prod mu pc anies, and consulti ing by the target date. ng firms. Although t Foeduca r addtiona itionl, and al discu scientif h ssi e EBRI/ICI project has collected d onic func of lifestyle/lifecycl tions of the Instit e fu ute. EBRI nds, see B -ERF ra ad ta fro is a tax-ex y and m Ho 1996 thro ld empt organization en (Julugh y 2007 20). 06, million recently hired participants holding balanced funds in 2005; and the 1.4 million recently hired participants holding balanced funds in 2006. Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. a large num $20,000–$40,000 Note: Percentages may not add to 100 percent because of rounding. Job tenure is generally years working at current employer, an ber of (percentage of participants) new plans (arguably 47.1% a good event 19.5% ) to the database would 6.3% tend t2.0% o pull down d thus may overstate years of th 20.1% e average account quarters of the participants in the 2006 EBRI/ICI database have account balances that are lower than EBRI/ICI 401(k) Database....................................................................................................... 14.6% .........5 by Participant b >$40,000–$50,000 Age, Tenure, Account Size, 40s 62.8% 22% or Salary 16.4% , 1996, 21% 20012.3% 0, 2005 or 20% 2006 5.8% ..........................39 20% _______ Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. 1001–5,000 _. “Contribution Behavior of 57.5% 401(k) Plan Pa 17.7% rticipants.” 15.3% EBRI Issue Bri 6.7% ef, no. 238; and ICI 12.4 a 15 25 Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. participation in the 401(k) plan. Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. Row percentages may not add to 100 percent because of rounding. participants. For exam i participants. There is little variation in participant lo m$0 portant for Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. meeting their income-replacement needs in ple, nearly 36 percent of participants hold an activit retirem y no by equit ent plan size (Figure 41). Loan ratios vary . For long-tenured participants in their y funds, while 21 percent of included in • Because 40 this analysis. Furtherm 1(k) balance supported b ore, account ba s can fluctuat y contributions lances are net of Figure 21 e with marke and grants. t returns fro unpaid loan balances. This m year-to-year, meaningful section The analysis is based on a sample of 3.0 million participants with account balances at the end of each year from 1999 through Figure 18, >$40,000–$60,000 Ratio of 401(k) Account Balance to Sala 50.9% 19.0% ry for Participants in Their 20s, by 5.6% 2.1% 2006. 17.2% Tenure.........25 balathe universe of data provi nce, Plan w-sp hicecific in h could t fo hrm en b atio e m n iders varies from on stakenl loan y prov desision cribes y d as is av ear to hu ailab rtiy near. In addition, the sam g le cu for th rrent e m part ajio crity o ipants f th , bu e tp ac ple lan tu s in of plans using a given ally th wo e sam uld t pele (in ll us c not lud hi ing ng $61,346, the size of the average account balance. In fact, 38.5 percent of participants have account balances Sources and T >$50,000–$60,000 ype of Data....................................................................................................... 50s 55.7% 19% 18.1% 19% 15.1% 18% 7.9% .................... 18% 5 100 >5,000 59.1% 15.7% 13.8% 7.2% b Perspective, Vol. 7, no. 4 (Employee Benefit Research Institute and Investment Company Institute, Age and tenure groups are based on participant age and tenure at year-end 2006. only slightl 1996 y when participants are grouped based on 1997 Average Asset Allocation of 401(k) Accounts, by Participant Age 1998 1999 2000 the size of their 401(k) 2001 2002 2003 plans (as 2004measur 2005 ed by th 2006 e participants hold m 20s with salaries between $20,000 and >$60,000–$80,000 ore than 80 percen 54.0%t of their balances in equity $40,000, t 17.6% he median account balance 5.2% funds (Figures 2.0% was $6,719 in 2006 (Figure 16). 26 and 15.9% 27). Furthermore, the examines the analysis of 4 change in account 01(k) plans balances of a group of must examine how pa participants who held accounts at the e rticipants’ accounts have performed over t nd of each ye h ar e Figure 45, about c provider can virtu oa nsistently participa lly all of Loans From change. Thus, the small p 401(k) Plans Tend to be Sm ting worke lans). So aggregate figures in this re m rs. Si e plmilarly, the aggre ans without th all is in ........................................................................39 gform ate a port generall v ation are erage account bala classified as y should nce would not hav bie n used to estimate time g a lo tend an to be pulle provision if d any 60 >$60,000–$70,000 60s 48.4% 16% 17.7% 17% 19.9% 16% 10.6% 16% of less than $10,000, while Investm All ent Options............................................................................................................. 17.5 percent of particip 58.1% 17.3% ants have accou 14.4% nt balances greater than $100,000 (Figur 7.4% ........................ 5 e Figure 19, Ratio of 401(k) Account Balance to Salary for Participants in Their 60s, by Tenure.........25 EBRI Issue Brief is a periodical providing 8.4 expert evaluations of employee benefit issues and October 2001). 11.2% $0 >$80,000–$100,000 56.1% 16.2% 5.3% 7.5 1.6% 15.5% number of plan participants; Figure 42). percentage of participants holdin d from own part Long-tenured participants in their 20s earning m 1999 thr if a larg icipante nu iough n th m e b 20 pl er of an 06. A has older an naly p out articip zg st in n ag a gr ndi o an eq ng ts uit oup h la opp y an fu of consistent pa en bal nds var ed to ance. o re re th T tire and ies with age, with 47 percent of participants in their hisan $100,000 marticipants rem ro y un ll derst over th ahad a median account balance of $57,794. te eir acco thoves the effect of participants and e num unt b ber a olan f pl ces. In ans offe ad ri dn ition g lo,a ch ns ( anges or long term. Looking at co Annual Percentage Change in Total Return Index, 1997–2006 nsistent participants in the EBRI/ICI 4 Percentage of account balances, 2006 01(k) database over the seven- trends, unless otherwise indicated. Reco >$70,000–$80,000 rds were encr 16% ypted to conceal the identity of em 15% 15% 15%ployers and Plans With GICs/Stable Value Funds Plans With GICs/Stable Value Funds Distribution of 80 Plans, Participants, and Assets by Plan Size ...................................................................... 5 6.4 10). The variation in account balances partly reflects th trends, as well as critical analy e effects of ses of emplo participant age, tenure, contributi yee benefit policies and proposals. EBRI Notes on is a >$100,000 1999 2000 59.7% 2001 16.7% 2002 5.8% 2003 2.2%2004 12.9% 11 2005 2006 ________. “The Impact of Employer-Selected Investment Options on 401(k) Plan Participants’ Asset 20s, 31 in th p Am e articip sam ong long- percent of particip pan le of rec ts elig tenured participants in their ib ord le kee for lo per ants in their 4 an s an s) b d/ecau or chsan e so g0 em s, and 42 s i en p 60s with $20, tlan he set s m pe a of y h rcent of participants in their 60s hol plaans ve000 t o fo ffe r w red oh $40,000 in salar i,c but h th n ey o part keep ic rec ipao n y r t i d h s ca n a 2006, t d tn al adin kes n o o g i h no equit u n e median account tfl , uence a plan t ylh oe an. It is plans entering and leaving the database Figure 20, 401(k) Plan Assets Concentrated in Equit >$80,000–$90,000 (and/or 14% 401(k) universe) on the overall average. 40s y Funds 14% .............................................................. 14% 14% About 29 percent, 26 9.3% 1–100 Age Group 20s 53.0% 53.4%21.4% 21.4%6.3% 5.4% 3.8% 3.0% 14.6% 12.3% employees but were coded so that year period from 1999 to 2006 (which both could be tracked over m included one of the worst a ultiple years. Dat bear m a provided for each arkets for stocks since Relationship of EBRI/ICI Datperiodical providing curr abase Plans to the Unive ent rse of information All 401(k) on a variety Plans ......................................... of employee benefit topics. 6 EBRI’s 10 behavior, rollovers from other plans, asset allocation, withdrawals, GICs /Stable loan activity, and employer contribution All Equity Balanced54.1%Bond 15.4% Money 5.9% Company 3.1% 17.7% 47.3% 50 Allocations: Preliminary Findings.” Working Paper Prepared for The Center for Pension and Retirement change i likely th n ag at th gregate avera is omissiog ne is small as th account balanc e U.S. e. Thus Gov , to asc ernmee nrtain t Acco what is untab happe ility Office (Octob ning to 401(k) pa er 1997 rticipants’ account ) finds that more than >$90,000–$100,000 13% 13% EBRI/ICI 13% 13% funds. The pe balance was 101–500 rcentage of participants holding $66,147. For long-tenured 30s 54.3% participants in 62.0% no equi 16.4%ty funds tends to fall as salary 15.7% their 60s earning m 6.1% 5.2% 3.1% ore than $100 2.5% 17.3% increases ( ,00 9.8% 0 F , igure 27). the median or 3.0 m 60illion, of the participants with accounts at th Pension Investment Report e end of 1999 provides detail had accounts at the end of e ed financial information on the univ ach y erse of defin ear from b ed participant include participant date of birth, from The Typical 401(k) Plan Participant ............................................................................................ which an age group is assigned; participant date of hire, ............... 6 Our the Great Depression): Figure 43 Figure 7 Total Characteristics of Participants w Age Group Funds Funds Fundsith Outstanding 401(k) P Funds Value Funds Stock lan Loans Other Unknown rates. Infor Plans With Company Stock mation in the EBRI/ICI database can be used to examine the relationship between account 5.5 $25,000 Figure 21, Average Asset Allocation of 401(k) Accounts, by Participant Age....................................26 >$100,000–$200,000 12 S&P 500 Russell 2000 N/A N/A N/A 10% balances 95 pe Rese , a set rcentarch (CP o of consistent f 401(k) RR) Current Pension Polic plan participants m s that offer loa un st be a s had at nalyzed. l y Issues Conf east one plan pa erence, at Mi rticipant with am an i Universit outstandiny g, Oxford, OH, June 8– loan. 501–1,000 40s 54.8% 59.4%15.8% 14.9%5.5% 5.4% 2.2% 2.7% 18.1% 12.9% benefit, defined contribution, and 401(k) plans. EBRI Fundamentals of Employee Benefit 1999 account balance was $350, Participants with no equi through 2006. ty 576. fund balances may still have exposure to the stock market through company Changes in 401(k) Particip from 20s which a tenure range is assigned; outstanding l 50.4% 19.0% ants’ Account 7.5% Balances 4.4% .......................................................................... oan 6.5% balance; funds in t 9.3% he pa 1.7% rticipant’ 1.2% s invest100% 6 ment The average Average Account Balances Among 401(k) Participants Present Percentage of Eligible Participants With 401(k) Loans, 401(k) account balance increased at an annual growth rate of 8.7 percent over $70,000 $20,000–$40,000 49.3% 11.5% 11.6% 6.0% 19.3% $66,650 4.5 12 balances and participants’ 26 age, tenure, and salary. >$200,000 N/A N/A N/A 5% In the 2006 EBRI/ICI data 1,001–5,000 50sbase, 85 percent of partic 52.2% 52.0%15.5% 15.4% ipants are in plans offeri 5.7% 6.2% 2.6% 3.2%ng 19.3% loans. However, as has 18.9% 20 Programs offers a straightforward, basic explanation of employee benefit programs in the The valu Th 40 9, 20 e m e eo d 01. Draft, May 20 fi an this p loan b ercen alan tag ce e is lower t outstan 01. dih ng an it wou is $4,089 ld h at year ave been -end if it were 2006. merely reflecting employee turnover and stock or balanced funds. I Figure 22, Distribution The ratio of participant account ndeed, 58 of 401(k) Plans, Partic percent of participan balance to sal ipants, and Assets, b ary is positively ts with no equit correl y Investm y fu ands ted with age and tenure. ehave investments in either nt Options.................. 26 40 In any 30s given 57.9% year, the change in a participan 13.5% 7.4% 3.2% t’s account balance is the su 5.2% 9.6% m of three factors: 2.2% 1.0% 100% Year-End 2006 Snapshot of 401(k) Participants’ Account Balances Figure 17 Figure 41 a ............................................. b 10 portfolio; and asset values >$40,000–$60,000 by Participant Age, Tenure, Account Size, attributed to t 45.8% hose funds. A 14.3% By Tenure n account bal 11.8% ance for each 5.0% or Salary,participant is the sum 19.9% of the publications the period, to $121,202 at year-end 200 Figure 11 6. Figure 15 Median Median Account Balance Figure 19 >5,000From Year-End 1999 Through Year-End 2006, 60s private and public sectors. 54.8% 11.1 43.8%13.2% EBR 15.0% I Databook o 5.8% by Age and Tenure, 6.5% n 3.5% Employee Benefits 3.9% 17.3% 1999–2006 is a statistic 27.4% al reference been the case Salary Range for the 11 years that the EBRI/ICI databases have tracked 401(k) plan participants, relatively retirement. The EBRI/ICI d 10.3 atabase 10.3 has added data providers since 1999 and by definition participants in these plans Investment Company Institute. 6 Quarterly Supplemental Data. Washington, DC: Investment Company 5 33.4% 40s 54.3% 12.6% 7.6% 3.4% 7.4% 11.5% 2.4% 0.7% 100% com Participants in their 60s, pany >$60,000–$80,000 stock or balanced funds (Fig having had m 44.9%ure 28). For exa ore ti 14.9% me to acc mpl um e, 46 percent of participants in their ulate assets, tend to hav 9.7% 6.5% e higher ratio 20s without s, while those 20.7% • Relationshi New contributions b p of Age and Te y the p nure to Acc articipant and/or the em ount Balances ............................................................................. ployer; 10 participant’s assets in all funds. Ratio of 401(k) Account Balance to Salary, by Age and Tenure Percentage of Eligible 401(k) Plan Participants Plan balances ar About the EBRI/ICI Database 1996, 2000, 2005, and 2006 e constructed as the sum of all participant balances in the Age Composition of Selected 401(k) Account Balance Categories (Median Tenure: 8 Years) 8.9 Ratio of 401(k) Account Balance to Salary for Participants in Their 60s, by Tenure (Mid-Point) All 401(k) Account Balances Greater Than $100,000, by Participant Age and Tenure volume on 54.1% (Mid-Point: half above, half below) employee b 15.4% enefit programs 5.9% and work force 3.1% related iss 17.7% ues. Plans With Company Stock Figure 23, 20 Average Asset $40,000 or less Allocation of Accounts, 17% by8.3 Participant Age and Invest 19% 8.4 18% ment Options 17% .........27 Tenure The median 401(k) account balance (half above, half below) increased at an annual growth 8.2 $19,926 woul few participants make use d not be included in the cons of this borr istent samplo ewing privilege. . Moreover, any tAt y ime a 40 ear-end 20 1(k) pla06, n sponl onsor y 18 percent of changed service those eligible for providers, 50s 46.7% 13.1% 8.9% 4.4% 11.9% 11.8% 2.6% 0.6% 100% $60,000 >$80,000–$100,000 Institute. 47.4% 15.0% 8.4% 6.9% 19.5% Relationship of Age and Tenure to Account Balances Relationship Between Account Balances and Salary............................................................................... $56,791 $19,398 Cerulli .13 equit in their 20s y funds hold 28.6% have the lowest ratios (Figur balanced funds as their onl e 17). In ad y equity investm dition, for ent; 6 percent of participants in t any given age and tenure com heir 20s bination, the With 401(k) Plan Loans, by Plan Size, 2006 Percentage, 2006 1996 2000 2005 2006 $20,000 plan. Plan size is esti • Total investment return on mated as the su account balances, whic m of active participh depends on t ants in the plan and, as such, does not 28.7% he performance of financial markets necessarily Percentage of participants with account balances in specified ranges, 2006 Percentage, 2006 $18,986 Age Group Plans With Company Stock Percentage of participants with account balances greater than $100,000 at year-end 2006 (years) Age Group >$40,000–$60,000 20s 49.1% 17% 15.5% 16% 9.8% 16% 5.0% 14% 18.7% 30 1999 2000 2001 2002 2003 2004 5.7 2005 2006 all particip 60s 350% anrate of 15.1 p ts in th 39.4% e plan wou ercent over the period, to 12.2% ld be exclud 10.8% ed from th6.0% e co$66,650 at nsisten18.8% t samp year-end 2006 le. 9.9% . 2.4% 0.5% 100% loans have 401(k) plan loans outstanding (Figure 43). As in previous years, loan activity varies with age, >$100,000 50.7% 15.9% 9.6% 5.7% 14.8% 4.8 100% c All 18% 18% 19% 18% without Year-End 2006 Figure 24, ratio of account balance to Russell 2000 equity Average Asset funds hold Index Snapshot of . Taco both balan ma, WA: Frank Russell Co Allocation of salary Asset varies so Allo ced funds and co cation 401(k) Accou me................................................................................ what m with p mpany any nts, b salary stock; .y Partici . For and 10 exam pant Salary $17,909 percent have onl ple, among and Investm participants in their 2 y co em nt p13 any stoc k 0s, Contact EBRI Publications, (202) 659-0670; fax publication orders to (202) 775-6312. There is a positive correlation between age and account and on t 1–100 he allocation of assets in an indi >$60,000–$80,000 >30 Years 15%vidual’s account; and 13% balance among 13% participants covered by the 2006 12% represent the total num 0 The EBRI/ICI Participant-Directed Retirem ber of em 30s ploy 40.4% ees at the sponsoring firm 54.0%27.4% 11.6% ent Plan 7.0%Data Collecti . 9.3% 9.0% on Project is the 3.9% 14.8% 19.2% 20s 13 60% All $2,558 $4,988 $7,282 $8,754 $13,950 $18,236 $22,236 $28,248 400% 6% $51,089 All 49.1% 12.9% 8.6% 4.3% 11.0% 11.1% 2.4% 0.7% 100% All Age Group 44.3% 10.6% 8% 13.5% 7.7% 21.1% Fo tenure, account balance, and salary r statistics in 22.4% dicating the higher propen . Of t sity o hose participants f withdrawals am in plans o ong pa 0–2 Years rticipants i ffering loans, n their 60s, see the highest pe Holden arcentages of nd 14 21.3% Subscriptions to EBRI Issue Briefs are included as part of EBRI membership, or as part of a Asset Allocation Options • The bulk of ........................................................................................................................ and 21.0% 401(k) a Investment Options ssets is invested in stocks. ........................................................................................ On average, at year-end 2006 ................... , about two-t ......... 13 28 hirds as their equity investm the ratio tends to increase s S&P 500 Ind 101–500ex >$80,000–$100,000 . Nee w York, NY: Standard & Poor’ nt. As a result, lightly 40s wi 45.8% many th salary 49.3% particip 14% State for low-to-m 13.5% m ants with no e en s. 10.9% t of O 12% 11.1% wn oderat ership quit 10.5% e sy a11.2% f lary unds h 11% groups (Figure 18). H 5.1% ave exposure to equit 13% 10% 16.8% owever, at y-21.8% EBRI/ICI dat Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. a 5–10 base. Exam $2,147 ination of t $4,480 he age com $6,817 position of account $8,371 balances finds that 53 percent of $13,568 $18,037 $22,158 $28,095 largest, most representativ 20s e repository of in 12% form 11% ation about individual 401( 11% 11% k) plan 50s • Withdrawals, borrowing, and loan repayments. $50,000 <100 participants 100–500 501–1,000 1,001–5,000 >5,000 0 90% 18.4% VanD Plans With Company Stock and GICs/Stable Value Funds a erhei (November 2002). 18.3% participants with outstanding loan $199 annual sub balances are scription am to ong EBR participants in their 30s, 40s, or I Notes and EBRI Issue Briefs. Individual 50s. In addition, copies are available GICs are guaranteed investment contracts. 300% United States Post >20–30 years al Service Statement of Ownership, Management, and Circulation. 20 Asset Allocation by Investment Options and Age, Salary, and Plan Size ................................................ 16 501–1,000>$100,00030s 50s 47.9% 42.0% 14% 11.9% 20% 10.8% 10% 19% 10.1% 14.3% 20% 8.3% 9% 8.0% 20% 8% 20.1% 22.3% of 401(k) participants' assets are invested in $15,246 equity securities through equity funds, the equity related investments throug high salary levels the ratio tends to decline somewhat. h company stock and/or balanced funds A similar pattern occurs am (Figure 29). ong participants in their 30s participants with account balances of U.S. Department of Labor. All $17,277 Pension $19,918 less than $10,000 are in their and Welfare Benefits Ad $22,382 $22,549 ministration 20s or $33,503 30s (Figure 11). Si (now E $42,082 mployee Benefits Security milarly $49,550 , more $61,368 Investmen b 350%participant accounts. As of t Options 16% Dec. 31, 2006, the EBRI/ICI database includes 15.8% 14 $20,000–$40,000 1998 1999 2000 35.4% 2001 11.5% 2002 3.6% 2003 0.9% 2004 19.1%2005 28.2% 2006 Figure 25, Row percentages may not add up to 100 percent because of rounding. Average Asset Allocation of 401(k) Accounts, by Participant Plan Size and Investment 40s with prepayment for $25 each (fo 22% r printed cop 21% $42,679 i22% es) or for $7.50 (as an e-m 22% ailed electronic file) Approximately 1.7 percent of the participants in the daFigure 35 tabase were missing a birth date; were younger than 20 years participants with five or f 1) Publication Title: EB Orders/ Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. RI Emplo 21 yee Benefit Research ewer y Institute ears of tenure or with Issue Brief. 2) Publication Numbe m r: 0887-137x ore than 30 . 3) Filing Day te: 0 ears of tenure are les 8/15/2007. 4) Issue Frequency: Monthl s likely to use the y. 5) Number of Issues All told, from Distribution of Equity Fund 1,001–5,000 year-end 199 60s Allocations a 9 to y49.3% ear-end n34.8% d Pa 2006 rticipan 11.1% , the average t E 8.9% xpos 13.4% u account balance am re to 20.3% Equities 6.6% ........................................ 13.2%ong the group 17.9% o16 f 19.5% $15,000 6% 7 20% 60s 5–10 $9,086 $12,760 $16,232 $17,757 $27,856 $36,263 $43,995 $55,453 60s (Figure 1 Among individual participants, the allocation of portion of ba 9). lanced funds, and company account balances to equities (equit stock. About one-third is in fixed-inc y funds, com ome securities pany than one-half Administration (EBSA)). of participants with account balances grea Private Pension Plan B ter than $100,000 are in t ulletin, Abstract of 1995, Form heir 50s or 60s. The positive 5500 Annual Reports. 50% Investment options are grouped into eight categories. Equity funds consist of pooled investments Published Annuall >$40,000–$60,000 80% statistical information about: y: 12. 6) Annual Subscription Price: $300 per 50s 36.7% year or is included 15.7% $13,493 as pa 17% rt of a membership subscription. 7) 17% 3.7% 19% Com1.1% plete Mailing Addr 19%ess of 14.9% Known Office of Public 26.5% ation: (Not printer): by calling EBRI or from www.ebri.org. Change of Address: EBRI, 2121 K Street, NW, Suite 19% Option......................................................................................................................... 27% 10.9% 19% ....................29 old; or were >5,000 older than 69 Asset Allocation Distribution of Account Balance to Balanced years $13,038 old. They 42.7% were not in10.3% cluded in thi13.7% s analysis. 7.9% 50s 22.2% loan provision than ot Distribution of Participa her participants. Onl nts’ Balanced Fund y Allocatio 11 per Figure 13 cent of participants with account balances of less than ns by Age 15%............................................................. 16 Plans With Company Stock and GICs/Stable Value Funds 10–20 $24,913 $26,607 $28,160 $12,810 $27,065 $38,874 $47,625 $54,851 $67,002 consistent participants increased 79 percent, rising Employee Benefit Research Institute (EBRI), 2121 K Street NW, Suite 600, Washington, DC 20037. 8) from $67,760 at Complete Mailing year-end 1999 to $121,202 at y Address of Headquarters or General Business Office ear-end of Publisher (Not 18% $40,000 60s 9% 9% $12,578 10% 11% >20 Years 250% Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. stock, and the 300% equity portion of balanced funds) varies widely around the average of 68 percent for all correlation between age an >$60,000–$80,000 Washington, such as stable value investm DC: U.S. Departm d account bal 600, Washingto 41.0% ea nt of Labor, Sprin e nce is expect nts and bond and m n 15.3% , DC 20037, (202) 659-0670; ed because younger worke g 4.0% 1999 oney . market fu 1.1% fax number, (202) 775-6 nds. These rs are likely 13.0% relative shares have to have lower 312; e-mail: 24.5% 10 primarily invested in stocks. These funds include equity mutual funds, bank collective trusts, life insurance 15 printer): EmployeePlans Benefit Research Institute (EBRI), 2121 K Street NW, Suite 600, Washington, DC 20037. 9) Full Names and Complete Mailing Addresses of Publisher, Editor, and Managing All $11,873 44.3% 10.6% 13.5% 7.7% 21.1% Funds Among Recently Hired Participants, by Age 11% AppDistribution of roxim $11,600 ately 6 Age Group .8 p Participa ercen Tenure (years) t of th nts’ Account Balances Increase With Age and Tenure e p 20s Com articipan pany Stoc ts in th 45.8% k Alloca e datab tions by a15.9% se were Age mi ........................................................... ssi4.9% ng a date of 2.5% hire and were 9.9% not include 16 d i 17.6% n this Note: The analysis includes 401(k) plan participants with two or fewer years of tenure in the year indicated and in a plan offe 40s $10, subscriptions 000 have loans outstan All $50,147 ding (Fi $51,423 gure 43). $51,908 $48,599 $66,490 ring company stock as an investment option. $79,588 $90,149 $108,262 2006 (Figure 5). This translates into an annual average growth rate of 8.7 percent over the seven-year period. 17% Figure 26, Asset Allocation Distribution Editor (Do not leave blan >$80,000–$100,000 70% k): Publisher, Employee Bene 45.0% fit Research Institute – Educa of 401( 13.6% tion and Res k) Account Balances to Equit earch F4.4% und, 2121 K Street NW, Su 1.0% ite 600, Wy ashing Funds, by Age ton, DC 20037. Editor, Dallas 12.4%4.9% 4.6% ........ 22.1% L. Salisbur 30 y, Publications Subscriptions@ebri.org. Membe 17%rship Information: 17% Inquiries regarding EBRI participants in the 2006 EBRI/ICI data Year-End 2006 Snapshot of Asset Allocation base. Thirty 17% -nine percent of participants have more than 80 percent of incomes and to have had le changed little over the past 11 ss time to accumy uears. late a balance with their current employer. In addition, they are separate U.S. Government Accountabilit acco • unts, and 20.0 million 0–2 othe 16% r pooled i 401(k) pl 16% y Office. “401(k) Pe nve an stm participants ents. Si 6% m nsion ilarly , in 5% Plans: , bond funds are any Loan Provisi 5% ons Enhance 6% 40s pooled account Participation But May primarily (percentage of plans) 16% 2.5% 16% Plans With Company Stock and GICs/Stable Value Funds 30s 52.3% 11.0% 5.1% a,b 1.7% 8.3% 17.9% Emplo Asset yee BenAllocation of Rece efit Resea 5–10 rch Institute – Education a $17,316 ntly Hire nd Research d Pa $21,627 Fund, 2121 rticipa K Street nts$25,262 ................................................................................ NW, Suite 600, Wa$26,346 shington, DC 20037. Manag $39,369 ing Editor, Ste $50,070 phen B 40% lakely, Emplo $59,772 ...... yee Bene 19 fit Re searc$74,075 h Institute – analysis. $30,699 $30,614 Figure 22 60s 25% Average 401(k) account balance, by age and tenure, 2006 Percentage of recently hired participants, 2006 The average >$100,000 401(k) account balance among t membership and/or contributions to EBRI-ERF 47.0% h12.7% is group rose and fell over the course of seven years, 4.2% should be directed to EBRI President/ASEC 1.0% 12.9% 20.3% 250% Age Group Education and Research Fund, 2121 K Street NW >2–5 , Suite 600, Washington, DC 20037. 10) Owner: 15% Full Name 14%: Employee Ben 14% efit Research Institute – Education a 15% nd Research Fund. 11) Known their account balances invested in equities, while 15 percent hold no equities at all in 2006 (Figure 30). less likely 200% 40% to have in their current plan accounts rollovers from a previous employer’s plan. invested in bonds, and Affect Inco • me Security 53,9$28,146 31 em balanced funds are pooled acc for Som ployer-sponsored 401(k) pla e.” Letter Report. ounts invested in both stoc GAns O-HEHS-98- , holding 5. Washington, DC: U.S. Government ks and bonds. Company 16 1–100 10–20 $49,613 40s 45.5% $50,57449.2%10.5% $50,88610.1%$47,258 5.9% 5.0%$64,809 5.1% 1.7%$77,563 16.7% 11.4% $87,805 6.3% 19.4% $105,501 100 40s $30,000 Figure 27, Asset Allocation Distribution Consistent with a long-ter Distribution of 401(k) P m invest lans,ment horizon, Pa of 401( rticipants k) Pla , an 40 nd Par 1 (As k) plan parti ticipant Account Balances to Equit sets, by Inc ve ipan stmen ts are heavily invested t Options, 2006y in equit y $10,000 Year-End 2006 Snapshot Bondholders, Mort • 401(k) pa gagees, and Other Secu rticipants conti rity Hol of 401( ders Ownin k) Pla g or Hold nue to seek n in Loan Activi g 1 Percent or Mor diversification of their investments e of Tot ty................................................................. al Amount of Bonds, Mortgages or >2–5 Years Other Securities: None. 12)Tax . The share of Status (F 19 or completion b 401(k) y 0 The positiv 60% e correlation between tenu Chairman Dallas re and acco Salisbur unt balan y at the ce is exp above ected b address, ( ecau 202) 659-0670; se long-term e e-mail: salisbur mployees hav y@ebri.org e had more All >5–10 43.8% 10.2% 24% 23% 5.1% 22%1.9% 23% 17.4% 18.5% corresponding to the overall performance of the equity markets during that period (Figure 6). For many Tenure (years) 60s $24,898 Percentage of Account Balance Invested in Balanced Funds nonprofit organiza20–30 tions authorized to mail at nonp $81,560 rofit rates) Th $80,805 e purpose, function, and nonprofit status $78,823 Figure 45 $72,177 of this organization and the ex $95,491 empt status for feder $111,677 al income tax $123,814 purposes: Has not chan $146,489 ged Average Loan Balances 101–500 50s 47.8% 41.8%14.1% 10.5%5.7% 5.4% 2.4% 2.0% 16.0% 18.4% 6.9% 19.0% stock is equit Accountability Office, October 1997. • y in the $1.228 trillion plan’s sponsor (the in assets. employer). Money funds consist of those funds designed to maintain >10–20 27% Figure 39 26% 26% 27% There is also Availability Funds, by Age, Tenure, and Salary and Use of a positive correlation between account 401(k) Plan Loans .............................................................................................. by Plan Size balance and tenure am ......................................................................... ong participants represented .19 ..30 securities. At Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. year-end 2006, nearly half (49 percent) of 401(k) plan participants’ account balances are time to accumulate an accounts invested in company stock c account balance. However, a rollover from ontinues to shrink, falling by 2 percent a previous employer’s plan could int age points (t erfere with this o during preceding 12 months: 501(c)(3). 13) Publication’s name: EBRI Employee Benefit Research Institute EBRI Issue Brief. 14) Issue DatPe e for Circu rcentage lation Data Be Percen low: Au tage gust 2007. 15) Ex Percentage tent and 200% Age Group 0–2 >2–5 >5–10 >10–20 >20–30 >30 participants, diversification of assets an Age Group Zero 1–10% 11–20% d ongoing contribut 21–30% 31–40% 41–50% ions helped to tem 51–60% 61–70% per the im 71–80% pact of equity 81–90% 91–100% market 8 501–1,000 -2.5% 45.1%-3.0% 11.3% 3.7% 18% 50s 2.9% 16.8% 11.8% Distribution of Participants’ Bala a >20–3060sLoans From 401(k) Plans Tend to be Small nced Fund Allocations by Age 34.3%25% 9.2%26% 5.2% 24% 2.3% 24% 30.1% 16.7% 26 50s Editorial Board: All Dallas L. Salisbury, publisher; Steve Blakely, $82,059 $82,495 $81,350 editor. Any views expr $75,546 essed in t $98,811 his publicati $115,006 on and those o $127,058 f the authors sh $148,927 ould Nature of Circulation: a. Total Number of Copies: Average No. Copies Each Issue During Preceding 12 Months: 1,300; No. Copies of Single Issue Published Nearest to Filing Date: 1,300. b. Paid a stable share price. Stable value product Minor investment options are not shown; therefore, row percentages will not add to 100 percent. Percentages are dollar-weighed 80 50% Asset Allocation Distribution of Recently Hired Participant Account Balance s, such as guaranteed investment contracts (GICs) averages. and other stable U.S. Internal Revenue Service. “Notice o Characteristics 150% of Participants with Outstanding f Proposed 401(k) Plan Rule Making, Loans........................................................ Certain Cash or Deferred Arrangements 19 by pos the 2006 EBRI/ ICI data itiv Invee correl stAm ment ong participants with o Opa titio onsn O b ffe ecau red bs ye a ro Planbase. A partic llover co utstanding l uld g ipant’ ive a sh oans at the s tenure Plan ort-te s n Par uwith an em red tiend of 20 cipa em nts ployee a h 06, t plA oy sse h er serves a i ts e gh average unpaid balance is $7,29 accou on f P ts b a proxy lan as lance. Th of P for articere is so ipthe length of ants om f Ae s sets2. invested in equity funds, on average (Figure 20). Altogether, equity securities—equity funds, the equity Cerulli 20s 20s 11 percent) i 51.5% n 5.0% >30 2006. That $4,5715.3% continued a steady $10,414 4.5% 13% 2.3%$17,120 35% decline 2.2% 16% that started in 1999. Rece 2.1% 17% 1.6% 17%1.6% 1.4% ntly hired 4 22.4%01(k) and/or Requested Circula b tion (1) Paid/Requested Outside-County Mail Subscriptions Stated on Form 3526: Average No. Copies Each Issue >10–20 Years During Preceding 12 Months: 718; No. Copies of Single performance Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. not be ascribed to the officers, 1,001–5,000 on their 401( 9 k) account ba trustees, mem 43.1% bers, or lances. The other sponsors of the E 11.1% median account 4.4% mploye balance (or midpoint, wit e Benefit Research 2.7% Institute, the EBRI Educ 19.0% h half above 13.9% ation and Figure 28, Percentage of 401(k) Plan Pa 5–10 $19,954 $24,769rticipants $28,524 Without E $29,847 quity Fund Balances Who Have Equit 40s $43,300 $54,770 $65,248y $80,465 $20,000 Salary information is available for a subset of participants in the EBRI/ICI database. -10 Individual 401(k) participants’ 30% Percentage of eligible participants with loans, by age, 2006 asset allocation to ba 15 lanced funds varies widely around an average of >10–20 Years 22 value funds, Average L The 200 oan are reported as Bala 6 EBRI/ICI database covers 40 per nces .......................................................................................................... one category. The “other” categor cent of the universe of 4 y is the residual for other investments, such as 01(k) plan .................. 19 a I ssu Eq e Published Near uiUnder E ty, Bond, M est to F om neploy y,iling and/ Dee Plans,” or ate: 718. (2) Paid Balanced Fun IFederal Register n-Count ds y Subscriptions Stated on F 23% 25,7, Vol. 46, N 16 orm 3526; 5,417Avera ,288o ge No. Copies Each . 21 $257 7 (Nove ,314,641 Issu ,0m e Durin 63ber 10, 19 g Prec 47.edin 7%g 12 Months: 135; No. Co 81): 55 27.1% 544–55 pies of Sing 2 549. 1.0%le Issue time a worker discernible evid has participat enceto Company Stock in 401(k) Plans With Company Stock, by Ag of rollAccount Size oveed in the 401(k) plan. r assets among the partici Indeed, 58 percen pants with account bal t of those part ances greater t icipants with account han $100e ,000 as 1 percent Again, si portion of bal milar to other anced funds, years of analy and comp sany is, loan balan stock—represent about two- ces as a percentage of account balances (net of the unpai thirds of 401(k) plan participants’ d Minor investment options are not shown; therefore, row percentages will not add to 100 percent. Resear 30s ch Fund, or52.1% their staffs. Nothin 5.7% g her 6.3% ein is to be co -9.1% 5.6% nstrued as an attem 2.8% p2.5% t to aid or hi 2.1% nder the adoption 1.4% of an 1.4% y pending le 1.1% gislation,18.9% regulation, c 150% >5,000 30s participants contribute to this trend: they 10–20 $57,100 $11,257 43.8% $59,067 $22,368 10.0% $60,185 are less likely $37,438$56,282 5.2% $55,693 to hold $75,237 1.8% employ $89,738 17.2% er stock. $101,585 19.3% $121,160 and half below) among this consistent group also grew, rising 168 percent from $24,898 in 1999 to $66,650 Published Nearest to F GICs are guaranteed investment contracts. iling Date: 135. (3) Sales Through Dealer as and Carriers, Street Vendors, Counter Sales, and Other Non-USPS Paid Distribution: Average No. Copies Each 10 Issue During Exposure, by Participant Age or Tenure, 2006 .............................................................................. 30s 31 40% <$10,000 12% 11% 12% 11% 13 percent (F b $5,000 Eq60 uity, Bond,igure 21). F Money, and/or Ba olr anc exam ed, anple, 59 percent of par d GICs ticipants hold no balanced funds, while 12 percent of -11.9% 30s of th Refere real estate funds. The final em han vces e t participants, 12 percent of w ..................................................................................................................... o or Loan as a Percentage of fewer years category of tenure an plans, and 46 , “u d 4 p nknown,” co ercent of th percent of 401(k) plan assets. nsists of fund em have Age Group between two s that could n and fivo e year t be identifie ................ s of tenurd. e..2 (F 1 ig ure 12). GICs are guaranteed investment contracts. or interpretative rule, or as legal, 29% accounting, actuarial, or other such professional advice. balances of less than $10,000 have five Precedin loan balance) for participants with loans 40s g 12 Months: 0; No. Copies of Sing 53.4% 4.9% le Issue Published N 5.7% ear or fewer y est to F 5.5% is 12 per iling Date: 0; (4) Othe ears of tenure, while 76 percent of those participants with 2.6% cent at y r Classes Mailed Throu 2.6% ear-end 2 2.3% gh 006 (Fi the USPS: Average No. 1.3% gure 44 Copies Each 1.4% ). In addi Issu1.1% e Du tio ring n, as in Precedin 19.0% g 12 Months: 0; asset Percentage of recently hired participants in plans offering company stock as an investment option, 2006 100% s. As in previous All 20–30 $114,985 years, the EBRI/ICI database f $113,703 43.8% $109,896 10.2% or y$100,760 ear-end 2006 fi 5.1% $130,294 1.9% nds that $150,121 participants’ 17.4% $164,487 18.5% asset allocati $192,003 on 40s $14,725 $29,010 $49,995 $89,822 $133,321 $10,000–$20,000 26% 23% 26% 26% >5–10 Years in 2006 (an annual average growth rate of 15.1 percent). 20s 17 No. Copies of Sing and/or Othele r S Istsab ue Published Near le Value Fund est to F s iling Date: 0; c. Total Paid and/or 26, Requested Cir 632 5,253 culation [ ,422 Sum of 15b. (1), (2 $266,723,774 ), (3), ,60s 069 and (4)] Aver 49.4a% ge No. Copi All es Each 26.2%Issue During 21. Pr 7% eceding 12 participants hold m • New employees embrace Remaining Account Balance ore than 80 percent of lifestyle/lifec their accounts in balanced funds (Fig 20s ycle funds. 40s Across all age groups, m ure 31). 16 ore new or recent 23 Endnotes .........................................................................................................................................21 50s 30+ 52.2% $114,259 4.5% 5.2% $111,939 5.5% $108,020 2.7% 2.8% $99,431 2.4%$126,869 1.4% $143,508 1.5% 1.1% $153,484 20.7%$174,992 Because 401(k) plans Figure 29, Average Asset Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. were introduced Allocation for 401(k) relatively recently (about 26 years ago), e Plan Participants Without E -20.5% ven ol qui der and l ty Fund Balances, onger-tenured -20 account balances great Months: 853; No. Copies previous EBRI Issu 100% e Brief years, there is variation aroun is of Sing register le er than $100,000 Ied in the U. ssue Publishe >$20,000–$30,000 d Near S. Patent and T est to Filinghave m Dad te: radem this aver 853. d. F ar ok rr26% e eOffice. e than 10 Distribution b age that corresponds with age (lower the older the ISSN: 0887 yy Mail (Samples, compl 25% ears of tenure (Figure 12). -137X/90 27% 0887 imentary - , 13 and other 7X/90 $ . a 27% free): (1) Outsid 50+. 50e-Count y as Stated on Form 3526: $10,000 varies considerably with age. Younger participants tend to favor equity funds, while older participants are 50s $17,854 $32,532 -22.1% $54,491 $99,794 $174,272 $167,806 Endnotes 30% Percentage of Account Balance Invested in Company Stock Am Equitong the consistent gro y, Bond, Money, and/or Balanced up, there is a wide range of and Company Stock 584 2,58 indivi 7,751 dual pa $199,572,rticipant experience, often influenced 151,262 1.1% 36% 12.9% 16.3% 40 20% a Average No. Copies Each Zero (No Loan) Issue During Preceding 12 Months: 85; No. Copie89% s of Single Issue Published Ne 78% arest to Filing Date: 85; 89% (2) In-County as Stated on F 82% orm 3526: Average No. Copies Each hires are investing their 401(k) assets i >$30,000–$40,000 25%n balanced funds, includi 25% 26% ng “lifest 27% yle” or “lifecycle” 60s Minor investment options are not shown; therefore, row percentages will not add to 100 percent. Percentages are dollar-weighted 54.5% 3.9% 4.4% 4.6% 2.3% 2.7% 2.3% 1.2% 1.3% averages. 1.0% 21.8% 60s em pl Distribution of Plans, Participan oyees coThe EBRI/IC uld ha All ve partic $121,982 I project is unique because of its inclusion of data provided by ipated in a 4$118,088 01(kts, and Assets by Plan Size ) plan fo $113,375 r, at most 27% , abo $103,711 ut half of t$127,008 heir careers. $139,140 The R a wide evenu$144,269 e Act of 1978 $157,727 participant), tenure (lower the higher the by Participant Age or Tenure ................................................................................................... tenure of the participant), account balance (lower the higher the 30s ......31 more likely to invest in fixed-income securities such as bond funds, GICs and other stable value funds, or Issue During Prec 60s eding 12 Months: 15; No. Copie $20,076 s of Single Issue Published Nea $31,914 rest to Filing $51,268 Date: 15. (3) Other Classes M $93,636 ailed Through t$157,069 he USPS: Averag>2–5 Years e No. Copies Eac $190,593 h Issue During 1 Exam Equib ty, Bo ining the interaction of bot nd, Money, and/or Balanced and Com h age and tenure pany Stock with account balances reveals that, for a given age 50% by the relatio Did you nship am read this as a ong the three factors mentione >$40,000–$50,000 pass-along? Stay ahea 24% d of d above: cont employ 25% ee benefit ributions, iss 25%ues inv with estment returns, and your 26% own subscription to EBRI Age Group GICs are guaranteed investment contracts. Zero 1–10% 11–20% 21–30% 31–40% 20s 41–50% 51–60% 61–70% 71–80% 81–90% 91–100% All 52.4% 1–10% 5.1% 5.6% 5.2% 2% 2.6% 2.5% 8% 2.2% 5% 1.5% 1.5% 6% 1.2% 20.4% See Cerulli Asso 5–10 ciates (20 $21,406 06). $26,393 $30,301 $31,679 $44,519 $55,390 $64,324 $76,690 1997 Preceding 12 Months: 0; No. Copies of Sing funds. 1998 EBRI/ICI At year-end 2006, 1999 le Issue Published N 2000 24 percent of the account balances of recently earest to Filing D 2001 ate: 0. e. Free Distribution Outside the M 2002 ail (2003 Carriers of other me2004 ans): hired participants in Average No. Copies Each I 2005 ssue Durin 2006 g cont Distribution of Participants’ Comp ained a provision that became Internal Re any Stock Allocations by Age venue Code Sec. 401(k). The law went into effect on January 1, 1980, but The 2006 EBRI/ICI database contains information 50% Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. variety of plan recordkeepers and, therefore, portra on 53,931 401(k) plans with $1.228 trillion ys the activity of participants in in assets 20% account balance), and salary (lower the h c >$50,000–$60,000 igher the part 24% icipant’s salary 24% 24% ). Overall, lo 25% ans from 401(k) plans tend m a oney nd GIC funds s and/or O (Figure 21). ther Stable Value Funds 999 6,759,727 $504,423,055,752 1.9% 33.8% 41.1% group, average account balances tend to increase Precedin Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. Issue Brief g Because few plans fall into this category, these percentages may be heavily influenced by a few outliers. 12 Months: 0; No. Copies of Sing for only $89/ le Iye ssue Published N ar electro ear n est to F ically iling e D -maile ate: 0. f. Total Fr with tenur d to yo ee Distribution (Sum of 15d. u e. For exam or $199/year pr ple, the average account balance of And 15e.): Ave inted and mai rage No. Copies Each led. For more i Issue During nformatio Preceding 12 n 20s 2 $0 20 60.0% 7.6% 7.5% 6.5% 4.8% 4.3% 2.7% 1.1% 0.8% 0.5% 4.3% -30 withdrawal and loan activity. Among participants who have had accounts at least since year-end 1999, Figure 30, Asset Allocation to Equi Note: At year-end 2006, the average account balance among all 20.0 million 401(k) participants was $61,436; the median account 10–20 >10%–20% $62,602 $65,309 ties Varies Widely 2% $65,892 27% Am 5% $62,437 ong Participants $80,718 2% ....................................... $94,030 balance was $18,986. 4% $103,616 32 $117,934 $0 it was n See Brady a ot until No and ve Hol mbd er 198 en (July 2007). 1 that proposed regulations were issued (see Holden, Brady, and Hadley (November >$60,000–$70,000 23% 24% 23% 24% Months: 100; No. Copies Participants’ their 20s were invested in balanced fun of Sing allocations to com le Issue Published Nearest to pany Filing stock rem Date: 100. g. Total Distribu ained ds, com tion (Sum of 15c. And 15f.): in line with pr pared with 19 perc evious Average No. Copies Eac year ent in 2005, s. Forty h Issue Durin -seven percent (or gand about 7 Preceding 12 Months: 953; No. per- and 20.0 m The analysis includes participants with two or fewer years of tenure in 2006. 401(k) illion participants (Figure plans of varying sizes—fro 1). Most of the plans in the datab m very large corporations to small businesses— ase are small: 43 percent of the plans All 53,931 20,018,188 1,228,033,622,146 to be small, with the vast majority about subscriptions, visit our Web site at of 401(k) particip www.ebri.org or compl ants in all age groups ete the form belo havin w and r g no l 0–2 Years eturn it to EBRI. oan at all (Figure 45). 30s 56.4% 9.6% 8.8% 7.3% 4.8% 4.1% 2.6% 1.1% 0.8% 0.5% 4.2% participants in their 60s wi Figures b 1996 20–30 1997 $130,165 th up t 1998 o two $127,834 1999 years of te $123,572 2000 nure is $20, 2001 $113,670 076, com 2002p $140,334 ared with $19 2003 $155,348 2004 0,593 for $162,473 2005 participants 2006 $178,253 Copies of Sing 3 le Issue Published Nearest to F >$70,000–$80,000 24% iling Date: 953. h. Copies not Distributed: Avera 26% ge No. Copies Each 23% Issue Du22% ring Preceding 12 Months: 347; No. Copies of Sing 23% le Issue Published participants who were y 10% 0% >20–30% ounger or had fewer y 2% ears of tenure experienced the larg 3% 1% est increases in average 3% Row percentages may not add up to 100 percent because of rounding. 1999 2000 2001 2002 2003 2004 2005 2006 2006 Asset Alloc ), Em10% ployee Ben ation and Investment Options efit Research Institute (February 2005), and U.S. Internal Revenue Service (November 10, 1981)). Source: Ta0% bulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. 9.3 m Th illion) of the 401( e Employee Benefit Research In k) participants in the 2006 EBRI stitute (EBRI) is a nonp /ICI database are in plans that offer com rofit, nonpartisan, public policy research op rany gani stock zation, as in the database have 25 or fewer particip cent in 1998. with a variety of investm ent optio ants, and 32 ns. percen >5–10 Years t have 26 to 100 participants. In contrast, only Figure 31, Asset Allocation Distribution Nearest to Filing Date: 347. i. Total (Sum of 15g. And 15h.): Average No. Copies Each of 401(Ik) Participant ssue During17 Preceding 12 Months: 1,300; Account Balance to Balanced Funds, No. Copies of Single Issue Published Nearest to Filing Date: 1,300. j. Sources: Bloomberg, Frank Russell Company, and Standard & Poor's. 40s 56.4% 8.9% 8.4% 7.6% 4.8% 4.3% 2.6% 1.0% 0.7% 0.5% 4.7% a 30+ $181,395 >$80,000–$90,000 $170,237 $159,753 23% $143,459 23% 21% $170,971 23% $181,269 $181,621 $193,701 0 0 to 2 >2–5 >5–10 >10–20 >20–30 >30 in their 60s wName ith mo re than 30 years of tenure (Figure 13). Similarly, the average account balance of 18 GICs are guaranteed investment contracts. account balance between year-end 1999 and year-end 2006. For example, the average account balance of 11% Percent Paid and/or Reques >30–80% ted Circulation: Average No. Copies Each Issue Durin 4%g Preceding 12 Months: 90%; No. Copies of Sing 6% 2% le Issue Published Nearest to F 5% iling Date: 90%. 16) Publication of a Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. <0.5% Figure 1, There which are The investment opti d 401(k) Plan Characteristics, by Num o te w s n o pos ot lo sibb bly o e expl r tak anat ons tha e pio os nition st a plan spons for t s on he l leg ow islativ acco ber of Plan Participants, 2006 or offers u e n pro t bal posals. a significantly nces among th affect how particip is grou ......................................7 p: (1) their emants allocate their ployer’s 401(k) plan >$90,000–$100,000 22% 22% 20% 21% The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. The Russell 200 an investment option (Figure 22). Among these participants, 67 percent hold 20 percent or less 0 Index measures the performance of the 2,000 of their 50s Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. 5 percent of t 57.7%he plans have m 8.9% 8.2% ore than 1,000 7.1% participan 4.5% ts. However, participants and assets ar 4.2% 2.5% 0.9% 0.6% e concentrated 0.5% 4.9% by Age ............................................................................................................................................32 All Statement of Ownership Note: Column perce All ntag Publication: Will be print es may not ad $67,760 d to 100% ed in the Au becaus$67,956 g e of r . 2007 issue of this publication. ounding. $67,258 17) Sig 4% natur $62,585 e and Title of Edit $81,665 or, Publisher, Business $94,568 Manager, or Owner $103,952 : Dallas Salisbury,$121,202 editor; a • Participants' 401(k) loan activity is modest. In 2006, 18 percent of all 401(k) participants participants in their 40s wi 0% th up to two years of tenure is $14,725, compared with $133,321 for participants a Account balances are participant account balances held in 401(k) plans at the participants' current employers and are net of pl 4Organiz <100 participants ation 100–500 501–1,000 1,001–5,000 an loans. Retirement savings held >5,000 participants in their 20s r >80% o>$100,000–$200,000 se 1,004 percent (a 40.9 * 22% pe Years of Tenure rcent annual average growth rate) between the end of 1% 20% 18% * 19% * smallest U.S. companies (based on total market capitalization) included in the Russell 3000 Index (which tracks the 3,000 large Employee Benefit Research Institute, publisher; Stephen Blakely, managing editor. Date: 08/15/07. st U.S. companies). has only recently been established (49 percent of all 401(k)-type plans in existence in 1995 were established after 1989 60s Account balances are participant account balances held in 401(k) plans at the participants' current employers and are net of p 401(k) assets. Figure 22 pr 59.6% 8.5% esents the distribution of 7.7% 6.3% 4.1% plans, participants, and assets by four com 3.8% 2.4% 0.9% lan loans. Retirement savings held in 0.6% binations of 0.5% 5.6% account balances in co The Investment Com m pp an any y Institu stock, i te (ICI) is t ncluding alm he natio ost na45 percent who hold none l association of the U.S. investm (Figure 32). ent compan On the other y industry. ICI 20s Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. in large plans. For example, 78 percent of participants are in plans with more than 1,000 participants, and b Figure 2, in plans at previous employers or rolled over into IRAs are not included. 401(k) Plan Characteris Less Than $10 >$200,000 ,000 tics, by Plan Asset S 18% >$40,ize, 2006 000–$5015% ,000..........................................................7 13% 13% More Than $100,000 Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. All indexes are set to 100 in December 1996. eligible for loans had tak Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. en a loan against their 401(k) account. Most loans tend to be small, in their 40s w plans at previous employers or rolled over into individuial retirement accounts (IRAs) are not included. 1–10 ith m 11–25 ore than 20 26–50 years of tenure. 51–100 101–250 251–500 501–1,000 1,001–2,500 2,501–5,000 5,001–10,000 >10,000 All Plans Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. A 0%ddress a 1999 and the (U.S Figure 32, Asset Allocation Distribution . Departme end of 2006 ( nt of Labor (SFigure 6). Be pring 1999), tacause y ble B of Participant Account .10 ounge )), or (r participants’ account balances tend to be small 2) the employee o Balance to Co nly recently j m op inany ed t h Stock in e plan. In ei ther All Sources: 58.0% Tabulations from 8.6% EBRI/ICI Par 8.1% ticipant-Direc7.0% ted Retiremen4.8% t Plan Data Co 4.2% llection Projec2.6% t, Cerulli Assoc 1.0% iates. 0.7% 0.5% 4.5% b m Iinvest cee rtif m y tha bers i m t all inf ent offerings. The first category n ocl rmu ation f de u8, rnishe 76d on this f 6 open or- m e is tr ndue i a nnd c vest omple me te: Ali nt com is c the base group, ia Willis, Co panimmunic es (m atut ions Assoc ual which consists of plans that do not fu ian ted . Da s) te, : 08/1 675/2007. 0 closed-end investment cooffer co mpaniesm , 44 pany 0 The analysis is based on a sample of 3.0 million participants with account balances at the end of each year from 1999 through 2006. hand, nearl Note: Components may not add to 100 percent because of rounding. y 9 percent have Salary Range more than 80 percent of their account balances invested in company stock. b The analysis is based on a sample of 3.0 million participants with account balances at end of each year from 1999–2006. these same plans account for 83 percent of all plan assets. Because most of the plans have a small number of * Less than 0.5 percent. Size of Account Balance The sample of participants changes over time. 0–2 >2–5 >5–10 >10–20 >20–30 >30 b Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. amounting, on average, to 12 percent of the remaining account balance. (Figure 7), co event, job 401(k) P Ci tenty/Suta re ntributitewou lans With Com /ZIPl d no ons pr t accu oduce signifi rately pany reflect actu Stock, cant growth i bya l 401 Age(k) .................................................................................. np them lan pa . In contrast, the average account balance rticipation. 33 Age and tenure groups are based on participant age and tenure at year-end 2006. $40,000 or less 18% 17% 19% 20% Figure 3, EB exchange-tRI/ICI Dat raded funds, a abase Represent nd four sponsors s Wide of uni Cross-Section of 401(k) Univers t investment trusts. Mutual fund mem eb .............................8 ers of the ICI have total assets of stock, GICs, or other stabl Note: Column percentages may not add to 100 percent because of rounding. e value funds. Twenty-seven percent of participants in the 2006 EBRI/ICI database a Number of Participants in Plan Salary Range The analysis includes participants with two or fewer years of tenure in 2006 in plans offering company stock as an investment o Years of Tenure ption. Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. >$40,000–$60,000 20% 23% 26% 27% Mail to: EBRI, 2121 K Street, NW, Suite 600, Washington, DC 20037 or Fax to: (202) 775-6312 Note: Row percentages may not add up to 100 percent because of rounding. Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. Note: Percentages may not add to 100 percent because of rounding. >$60,000–$80,000 18% 23% 24% 22% Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org 29 15 30 28 11 27 3 18 14 24 39 31 12 3 3 26 3 9 7 8 2 4 >$80,000–$100,000 17% 21% 22% 17% 22 10 16 4 2 6 23 21 19 13 5 3 EBRI EBRI EBRI EBRI EBRI EBRI EBRI EBRI EBRI EBRI EBRI EBRI Iss Iss Iss Iss Iss Issu u u u u uIss Iss Iss Iss Iss Iss e B e B e B e B e B e B u u u u u ur r r r r r e B e B e B e B e B e B ief No. ief No. ief No. ief No. ief No. ief No. r r r r r rief No. ief No. ief No. ief No. ief No. ief No. 308 308 308 308 308 308 308 308 308 308 308 308 • • • • • • Aug Aug Aug Aug Aug Aug • • • • • • Aug Aug Aug Aug Aug Aug u u u u u us s s s s st 20 t 20 t 20 t 20 t 20 t 20 u u u u u us s s s s st 20 t 20 t 20 t 20 t 20 t 20 07 07 07 07 07 07 07 07 07 07 07 07 • • • • • • www.eb www.eb www.eb www.eb www.eb www.eb • • • • • • www.eb www.eb www.eb www.eb www.eb www.eb ri.org ri.org ri.org ri.org ri.org ri.org ri.org ri.org ri.org ri.org ri.org ri.org © 2007, Employee Benefit Research Institute -Education and Research Fund. All rights reserved. >$100,000 14% 16% 16% 12% EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org EBRI Issue Brief No. 308 • August 2007 • www.ebri.org Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. 3 3 3 20 17 25 6 5 7 EBRI Issue Brief No. 308 • August 2007 • www.ebri.org 38 <$10,000 $20,000–$30,000 $10,000–$20,000 >$30,000–$40,000 >$20,000–$30,000 >$30,000–$40,000 >$40,000–$50,000 >$40,000–$50,000 >$50,000–$60,000 >$50,000–$60,000 >$60,000–$70,000 >$60,000–$70,000 >$70,000–$80,000 >$70,000–$80,000 >$80,000–$90,000 >$80,000–$90,000 >$90,000–$100,000 >$90,000–$100,000 0 0 $ 0 >$1 0,0 0– 200,0 0 >$100,000 >$200,000 $ 0 2 ,000–$30,000 >$30,000–$40,000 >$40,000–$50,000 >$50,000–$60,000 >$60,000–$70,000 >$70,000–$80,000 >$80,000–$90,000 >$90,000–$100,000 >$100,000 Figure 28 Figure 26 Percentage of 401(k) Plan Participants Without Equity Fund Balances Asset Allocation Distribution of 401(k) Participant Account Balances to Equity Funds, by Age Figure 36 Who Have Equity Exposure, by Participant Age or Tenure, 2006 a,b Average Asset Allocation of 401(k) Accounts, by Participant Age and Percentage of participants, 2006 Figure 30 Percentage of Participants Without Equity Funds a Figure 1 Investment Options Among Participants With Two or Fewer Years of Tenure Percentage of Account Balance Invested in Equity Funds Asset Allocation to Equities Varies Widely Among Participants Company stock and/or Balanced funds as only Both balanced funds Company stock as only a 401(k) Plan Characteristics, by Number of Plan Participants, 2006 Figure 32 b balanced funds equity investment and company stock equity investment Age Group Zero 1–10% 11–20%Percentage of account balances, 21–30% 31–40% 41–50% 1998, 2005, and 2006 51–60% 61–70% 71–80% 81–90% 91–100% Asset allocation distribution of 401(k) participant account balance Asset Allocation Distribution of Participant Account Balance to Company Stock in 401(k) Plans With Company Stock, by Age a b 20s Age Group 47.0% Number of Plan Participants 1.8% 2.4% Total Plans 3.6% Total Participants 3.6% 4.7% Total Assets 5.9% 5.4% Average Account Balance 6.2% 5.1% 14.3% to equities, by age, percentage of participants, 2006 a,b c Equity Balanced Bond Money GICs /Stable Company 20s 61.9% 46.3% 5.9% 9.7% Percentage of Participants, 2006 30s 32.7% 1–10 2.5% 2.9% 4.2% 4.5% 6.1% 7.3% 7.2% 8.1% 6.8% 17.6% 10,595 60,684 $3,271,136,768 $53,904 Funds Funds Percentage of Account Balance Invested in Equities Funds Funds Value Funds Stock 30s 60.2% 40.0% 6.6% 13.6% 11–25 40s 31.4% 3.1% 3.3% 12,590 4.6% 4.9% 215,695 6.4% $10,352,850,461 7.7% 7.3% $47,998 8.0% 6.4% 16.9% Percentage of Account Balance Invested in Company Stock Age Group 1998 2005 40s Age Group 2006 1998Zero2005 58.8%2006 1–20% 1998 >20–40% 2005 34.9% 2006 >40–60% 1998 >60–80% 6.7% 2005 2006>80–100% 1998 17.2% 2005 2006 1998 2005 2006 50s 34.2% 26–50 4.1% 3.9% 9,673 5.2% 5.4% 349,620 6.6% $16,446,217,460 7.7% 6.9% $47,040 6.9% 5.1% 14.1% Age Group Zero 50s 1–10% 11–20% 58.6% 21–30% 31–40% 31.0% 41–50% 51–60% 6.5% 61–70% 71–80% 21.2% 81–90% 91–100% ALL PLANS 20s 17.9% 2.3% 4.2% 8.4% 33.8% 33.4% 60s 41.8% 4.9% 4.1% 5.0% 5.0% 5.8% 6.6% 5.4% 5.1% 3.6% 12.7% 51–100 7,521 533,944 $25,091,339,115 $46,992 60s 52.7% 24.8% 4.9% 23.1% 20s 66.9% 50.6% 49.7% 7.4% 19.3% 23.8% 5.1% 9.6% 7.1% 4.0% 4.7% 4.4% 3.7% 6.9% 5.9% 10.5% 7.5% 6.6% 20s 55.1% 8.4% 7.8% 6.7% 5.3% 4.7% 3.2% 1.6% 1.2% 0.8% 5.2% 30s 13.0% 2.8% 4.6% 9.1% 28.6% 42.0% b All 35.6% 101–250 3.2% 3.3% 6,241 4.5% 4.8% 985,744 6.1% $47,204,381,398 7.2% 6.7% $47,887 7.2% 5.8% 15.6% 30s 67.8 55.9 All 56.4 8.0 16.8 58.4% 20.1 5.1 10.3 35.5% 7.5 4.1 6.3% 3.8 3.6 3.2 16.6% 5.5 4.5 9.4 5.9 5.1 30s 45.6% 12.5% 9.7% 7.9% 5.8% 4.8% 3.3% 2.0% 1.5% 1.2% 5.8% 40s 12.9% 3.6% 5.3% 9.9% 26.7% 41.5% 40s Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. 64.5 52.8 54.1 9.7 17.6 20.3 5.9 10.9 8.0 5.1 4.3 4.0 4.4 6.7 5.6 8.0 6.2 5.2 251–500 2,896 1,023,244 $48,811,260,649 $47,702 Tenure (years) a 40s 41.8% 14.5% 9.8% 7.8% 5.8% 4.7% 3.4% 2.2% 1.7% 1.4% 6.9% 50s The analysis includes the 20.0 million participants in the year-end 2006 EBRI/ICI database. 60.5 47.3 48.6 11.3 18.5 21.8 6.6 12.2 9.0 5.9 4.8 4.8 6.7 9.7 8.0 6.5 5.7 5.0 0–250s 14.1% 62.6% 5.2% 6.6% 48.5% 11.2% 26.1% 6.2% 36.7% 7.9% 501–1,000 1,723 1,222,735 $63,068,104,508 $51,580 b 60s Row percentages may not add to 100 percent because of rounding. 50.0 42.0 43.5 12.1 16.7 20.3 8.7 13.3 9.8 7.8 5.2 6.2 13.3 14.5 12.2 5.7 5.8 4.7 50s 40.8% 15.9% 9.2% 7.1% 5.4% 4.4% 3.2% 2.2% 1.7% 1.4% 8.6% >2–5 59.5% 40.4% 6.4% 12.8% 1001–2500 60s 19.7% 7.3% 1,384 7.6% 2,155,521 11.1% $113,965,797,333 22.2% 32.1% $52,872 All 64.8 51.7 52.5 9.1 17.7 21.0 5.7 11.0 8.0 4.9 4.4 4.3 4.6 7.4 6.2 8.6 6.1 5.3 >5–10 57.3% 33.3% 7.4% 16.7% 60s 44.2% 15.2% 7.5% 5.8% 4.4% 3.6% 2.8% 1.9% 1.5% 1.4% 11.6% 2,501–5,000 653 2,290,175 $129,899,221,263 $56,720 All 14.8% 4.0% 5.5% 9.9% 27.4% 38.5% PLANS WITHOUT COMPANY STOCK, GICs, OR OTHER STABLE VALUE FUNDS Figure 27 >10–20 56.1% 27.5% 7.4% 21.2% All 44.5% 13.6% 9.1% 7.3% 5.5% 4.5% 3.2% 2.1% 1.6% 1.3% 7.3% Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. 5,001–10,000 313 2,144,822 $141,478,240,897 $65,963 20s 77.8 53.5 53.4 7.8 24.1 26.9 7.7 14.3 10.5 4.9 7.5 7.9 >20–30 56.0% 18.3% 6.3% 31.4% Asset Allocation Distribution of 401(k) Participant Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. a Equities include equity funds, company stock, and the equity portion of balanced funds. 30s 77.9 59.6 >10,000 60.4 8.4 19.5 22.5 342 7.2 9,036,004 14.5 10.4 $628,445,072,293 4.8 5.8 5.6 $69,549 a >30 52.4% 11.6% 3.9% 36.9% The analysis includes the 9.3 million participants in plans with company stock. b Account Balances to Equity Funds, by Age, Tenure, or Salary The analysis includes the 20.0 million 401(k) plan participants in the year-end 2006 EBRI/ICI database. 40s 74.0 56.7 b 58.3 9.9 20.5 23.3 8.3 15.3 10.9 6.0 6.7 6.4 b All 53,931 20,018,188 $1,228,033,622,146 $61,346 All Row percentages may not add up to 100 percent because of rounding. 58.4% 35.5% 6.3% 16.6% Percentage of participants, 2006 50s 70.3 50.6 Note: Row percentages may not add to 100 percent because of rounding. 52.0 11.3 22.2 25.8 10.0 17.8 12.8 6.5 7.8 7.8 Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. 60s 59.4 44.8 a 45.3 11.8 20.9 25.7 13.5 20.3 14.3 12.2 8.5 9.9 Components may not add to the total in the first column because of rounding. Note: The median account balance at year-end 2006 is $18,986. Percentage of Account Balance Invested in Equity Funds All 75.0 55.1 b 56.3 9.3 20.9 24.0 8.2 15.8 11.3 5.7 6.9 6.9 The analysis includes the 7.1 million participants with no equity funds at year-end 2006. Zero 1–20% >20%–80% >80% PLANS WITH GICs AND/OR OTHER STABLE VALUE FUNDS All 35.6% 6.5% 36.5% 21.4% 20s 73.4 52.0 50.7 7.3 20.2 26.1 3.9 6.8 5.1 2.9 3.5 2.5 9.1 14.9 12.0 Figure 29 Figure 31 Age 30s 73.5 56.4 56.0 8.1 18.1 22.7 4.1 7.3 5.3 2.8 3.0 2.3 7.9 12.3 9.3 Average Asset Allocation for 401(k) Plan Participants Without Figure 2 Asset Allocation Distribution of 401(k) Participant Account Balance to Balanced Funds, by Age 40s 69.0 54.1 54.1 9.4 18.7 22.8 5.0 7.9 5.9 3.4 3.3 2.7 9.5 13.9 10.7 20s 47.0% 4.3% 29.4% 19.4% Equity Fund Balances, by Participant Age or Tenure 401(k) Plan Characteristics, by Plan Assets, 2006 a 50s 63.6 49.4 49.4 10.2 18.4 23.3 5.9 9.2 7.1 4.6 3.7 3.2 11.9 17.6 13.6 30s Perce32. nta 7% ge of Particip5. an 4% ts, 2006 37.4% 24.5% Percentage of account balances, 2006 60s 52.7 43.9 46.3 11.2 17.3 20.9 6.8 9.5 8.1 7.2 4.8 3.9 19.2 23.5 18.6 Total Plan Assets Total Plans Total Participants Total Assets Average Account Balance a 40s 31.4% 6.4% 38.9% 23.3% GICs /Stable Balanced Bond Money Company All 69.7 52.8 52.5 7.9 18.6 23.2 5.0 7.9Figure 33 6.0 3.5 3.4 2.8 10.1 15.0 11.7 Percentage of Account Balance Invested in Balanced Funds $0–$250,000 9,749 104,130 $995,569,641 $9,561 b 50s 34.1% 7.9% 38.7% 19.2% a Total Funds Funds Funds Value Funds Stock Other Unknown PLANS WITH COMPANY STOCK Age Group Zero 1–10% 11–20% 21–30% 31–40% 41–50% 51–60% 61–70% 71–80% 81–90% 91–100% More Recently Hired 401(k) Plan Participants Hold Balanced Funds >$250,000–$625,000 8,932 179,807 $3,790,362,963 $21,080 60s 41.8% 9.0% 32.9% 16.3% 20s 51.8 51.2 50.0 6.1 15.5 20.1 5.0 12.2 9.1 5.4 5.7 5.2 29.5 15.2 14.0 Age Group 20s 53.8% 5.5% 5.5% 4.7% 2.5% 2.3% 2.1% 1.6% 1.4% 1.2% 19.4% Percentage of recently hired participants holding balanced funds, 1998–2006 >$625,000–$1,250,000 8,570 274,274 $7,775,610,380 $28,350 30s 56.0 55.0 54.8 6.6 14.4 18.2 5.3 12.9 8.9 5.2 4.8 4.7 24.6 12.6 11.5 20s 49.2% 6.5% 11.9% 15.3% 12.9% 2.3% 2.0% 100.0% Tenure (years) 30s 57.5% 7.3% 6.8% 5.8% 3.0% 2.5% 2.0% 1.3% 1.2% 0.9% 11.6% >$1,250,000–$2,500,000 7,964 413,572 $14,162,640,262 $34,245 40s 54.4 51.2 51.5 8.2 14.9 18.9 6.5 14.4 9.4 6.4 5.4 6.1 22.6 13.6 12.3 30s 42.4% 8.1% 10.8% 15.2% 17.2% 5.3% 1.2% 100.0% 0–2 45.4% 3.5% 30.8% 20.3% Age Group 1998 1999 2000 2001 2002 2003 2004 2005 2006 50s 53.2 44.7 44.7 9.8 17.0 20.8 6.9 17.4 10.8 8.6 6.3 8.6 19.4 13.0 12.6 40s 59.1% 40s >$2,500,000–$6,250,000 7.3% 33.0% 6.8% 9.1% 6.0% 7,979 10.3% 3.3% 821,817 20 2. .0% 7% $31,589,372,391 2. 21. 2% 1% 1.5.6 2%% 1.1. 1% $38,438 0% 0. 109% 0.0% 9.4% >2–5 40.7% 5.1% 35.4% 18.9% 20s 27.0% 28.3% 27.1% 27.3% 32.7% 35.1% 38.9% 43.5% 48.5% 60s 47.2 42.2 37.8 11.1 14.9 20.6 14.3 23.2 12.8 6.4 5.8 14.3 19.3 12.1 11.4 50s 26.1% 10.1% 11.0% 27.1% 20.2% 4.9% 0.8% 100.0% >$6,250,000–$12,500,000 3,924 887,706 $34,552,271,777 $38,923 50s 60.1% 6.9% 6.4% 5.9% 3.5% 2.9% 2.3% 1.3% 1.1% 0.9% 8.7% >5–10 30.3% 6.4% 39.0% 24.4% All 54.2 51.0 50.8 7.2 15.1 19.2 6.3 14.5 9.5 6.1 5.4 6.2 24.1 13.3 12.3 30s 29.0% 31.0% 28.3% 26.5% 33.1% 36.2% 39.8% 42.8% 47.9% 60s 18.5% 12.8% 12.5% 36.7% 15.1% 3.7% 0.6% 100.0% >$12,500,000–$25,000,000 2,587 1,062,639 $45,041,610,679 $42,387 c 60s 65.3% 5.6% 5.1% 5.0% 3.1% 2.7% 2.2% 1.1% 1.0% 0.8% 8.1% PLANS WITH COMPANY STOCK AND GICs >10 AND/OR OTHER STABLE VALUE FUNDS –20 26.9% 8.2% 41.2% 23.8% All 40s 30.5% 27.1% 33.6%10.3% 30.8%11.4% 27.9% 27.1% 33.7% 18.3% 35.7% 4.8% 39.8% 0.8% 42.1% 100.0% 46.6% >$25,000,000–$62,500,000 2,025 1,830,017 $79,356,274,791 $43,364 20s 56.2 46.5 45.6 8.2 16.3 21.2 2.3 6.3 4.5 2.5 2.5 2.4 6.7 10.4 9.5 22.0 15.9 13.6 All 59.1% 6.8%>20–30 6.3% 5.6% 31.4% 3.1% 2.9. 6% 8% 2.1% 40.0% 1.3% 18. 1. 8% 1% 0.9% 10.9% Tenure (years) 50s 30.9% 34.9% 32.1% 29.2% 33.9% 35.5% 40.3% 43.3% 47.8% >$62,500,000–$125,000,000 887 1,675,914 $77,129,176,826 $46,022 30s 56.3 52.3 53.3 8.9 14.4 16.6 2.6 7.0 5.3 3.3 1.9 1.7 5.9 9.0 7.9 20.6 12.7 10.6 Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. 0–2 >30 56.0% 6.7% 43. 11.5% 2% 13.7% 10.8% 6.8% 32.3% 4.4% 13.7% 0.9% 100.0% 60s 28.4% 34.9% 33.2% 29.1% 30.2% 30.7% 36.3% 41.6% 45.5% 40s a 53.8 48.6 51.2 11.0 15.1 16.3 2.8 7.2 6.0 5.0 2.2 1.8 7.8 10.9 9.6 17.3 13.6 10.9 >$125,000,000–$250,000,000 582 1,977,204 $102,643,721,668 $51,914 The analysis includes the 20.0 million 401(k) plan participants in the year-end 2006 EBRI/ICI database. 2–5 45.2% 11.1% 13.3% 15.6% 9.9% 3.6% 1.3% 100.0% Salary 50s 49.3 43.4 46.1 13.8 15.6 17.3 3.3 7.2 6.3 5.3 2.2 2.0 11.8 16.4 13.7 14.5 13.1 10.9 All 28.9% 31.3% 29.1% 27.4% 33.0% 35.4% 39.3% 42.8% 47.6% Note: Row percentages may not add up to 100 percent b >$250,000,000 ecause of rounding. 732 10,791,108 $830,997,010,768 $77,008 5–10 38.3% 9.8% 12.8% 17.5% 15.3% 5.2% 1.1% 100.0% $20,000–$40,000 41.8% 9.0% 34.6% 14.6% 60s 38.0 37.5 41.2 14.3 12.9 15.1 2.6 6.8 6.4 4.9 2.2 2.8 27.8 24.9 20.9 10.7 14.2 10.7 Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. 10–2 All 0 29.6% 9.7%53,931 11.3% 20,018,188 22.9% $1,228,033,622,146 20.0% 5.6% 0. $61,346 9% 100.0% a All 54.1 47.7 49.4 >$40,10.1 000–$60,15.0 000 17.1 32. 2.4 5% 7.0 9. 5.7 9% 2.4 40.2% 2.2 2.0 17.3% 10.1 12.3 10.6 18.6 13.6 11.2 The analysis includes participants with two or fewer years of tenure in 2006. 20–3 Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. 0 22.4% 9.4% 10.1% 29.4% 22.8% 5.2% 0.7% 100.0% Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project >$60,000–$80,000 25.6% 9.3% 44.8% 20.4% a 30+ Note: The median account balance at year-end 2006 is $18,986. 13.9% 9.7% 11.7% 40.7% 19.4% 3.9% 0.6% 100.0% The analysis is based on the 1.2 million recently hired participants (those with two or fewer years of tenure) holding balanced funds in 1998; the 2.2 million recently hired participants holding balanced funds in 2005; and the 2.8 million c recently hired participants holding balanced funds in 2006. >$80,000–$100,000 20.8% 8.4% 47.9% 22.9% All 27.1% 10.3% 11.4% 27.1% 18.3% 4.8% 0.8% 100.0% b Minor investment options are not shown; therefore, row percentages will not add to 100 percent. Percentages are dollar-weighted averages. Source: Tabulati>$1 ons fr 00, om000 EBRI/ICI Participant-Directed Re17. tirem 8% ent Plan Data Collect7. ion 0% Project. 48.3% 26.9% c GICs are guaranteed investment contracts. a GICs are guaranteed investment contracts. Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. b Row percentages may not add up to 100 percent because of rounding. Percentages are dollar-weighted averages. Note: Percentages may not add to 100 percent because of rounding. c The analysis includes the 7.1 million participants with no equity funds at year-end 2006.

Volume 308

Pages 40

EBRI Issue Brief

Jack VanDerhei

Sarah Holden

Craig Copeland

Luis Alonso

Retirement