401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2015

The asset allocations of 401(k) retirement plan savers in their 20s at the end of 2015 differed significantly from the allocations of 401(k) participants in their 20s in the mid-1990s, according to the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI).

Executive Summary

The bulk of 401(k) assets were invested in stocks.On average, at year-end 2015, 66 percent of 401(k) participants’ assets were invested in equity securities through equity funds, the equity portion of balanced funds, and company stock. Twenty-seven percent was in fixed-income securities such as stable-value investments, bond funds, and money funds.

More 401(k) plan participants held equities at year-end 2015 than before the financial market crisis (year-end 2007), and most had the majority of their accounts invested in equities.For example, about three-quarters of participants in their 20s had more than 80 percent of their 401(k) plan accounts invested in equities at year-end 2015, up from less than half of participants in their 20s at year-end 2007. Overall, more than 90 percent of 401(k) participants had at least some investment in equities at year-end 2015.

Nearly 65 percent of 401(k) plans, covering nearly three-quarters of 401(k) plan participants, included target-date funds in their investment lineup at year-end 2015.At year-end 2015, 20 percent of the assets in the EBRI/ICI 401(k) database were invested in target-date funds and about half of 401(k) participants in the database held target-date funds. Also known as lifecycle funds, these funds are designed to offer a diversified portfolio that automatically rebalances to be more focused on income over time.

A majority of new or recent hires invested their 401(k) assets in balanced funds, including target-date funds.For example, at year-end 2015, 70 percent of recently hired participants held balanced funds in their 401(k) plan accounts. Balanced funds comprised 41 percent of the account balances of recently hired 401(k) participants at year-end 2015. A significant subset of that balanced fund category is invested in target-date funds. At year-end 2015, 34 percent of the account balances of recently hired participants were invested in target-date funds.

401(k) participants’ investment in company stock continued at historically low levels.Less than 7 percent of 401(k) assets were invested in company stock at year-end 2015, roughly the same share as in 2012, 2013, and 2014. This share has fallen by 66 percent since 1999 when company stock accounted for 19 percent of assets. Recently hired 401(k) participants contributed to this trend: they tend to be less likely to hold company stock. At year-end 2015, about one-quarter of recently hired 401(k) plan participants in plans offering company stock held company stock, compared with about 43 percent of all 401(k) participants.

401(k) participants were less likely to have loans outstanding at year-end 2015 than at year-end 2014.At year-end 2015, 18 percent of all 401(k) participants who were eligible for loans had loans outstanding against their 401(k) plan accounts, down from 20 percent at year-end 2014. Loans outstanding amounted to 12 percent of the remaining account balance, on average, at year-end 2015, up 1 percentage point from year-end 2014. Loan amounts also edged up a bit in 2015.

The year-end 2015 average 401(k) plan account balance in the database was 3.8 percent lower than the year before, reflecting in large part the changing composition of the sample rather than the experience of typical 401(k) participants in 2015. To understand changes in 401(k) participants’ average account balances, it is important to analyze a sample of consistent participants. For 401(k) participants present in both 2014 and 2015, the average account balance increased by 3.1 percent. As with previous EBRI/ICI updates, analysis of a sample of consistent 401(k) plan participants is expected to be published later this year.

The average 401(k) plan account balance tends to increase with participant age and tenure. For example, at year-end 2015, participants in their 40s with more than two to five years of tenure had an average 401(k) plan account balance of about $35,000, compared with an average 401(k) plan account balance of more than $280,000 among participants in their 60s with more than 30 years of tenure.

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A sets in eq t yea uirt-iend 2015, es—little ch thang e EB ed f RIr /I om CI t dat he 77 aba pe se r ice ncn lud t sed s hare tat for is t tih cei alr i 1996 nformcoun ation o tern 26.1 m parts. illion 401(k) differed significantly from the allocations of 401(k) participants in their 20s in the mid-1990s, according plan participants in 101,625 employer-sponsored 401(k) plans, which held $1.9 trillion in assets and to the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI). T cov heer ved ne ehicles ar lty ha hal t yfoung of aler l a s ct av iv er e 401 s are us (k) pa ingr t tio ciipan nves ts. t i n equities, however, have changed. Savers in their 20s allocated 28 percent of their aggregate assets to equity funds at year-end 2015—about half of the 55 Today, EBRI and ICI released “401(k) Plan Asset Allocation, Account Balances, and Loan Activity in Full perc ent res ul sha ts o re f t alh loca e ann ted by ual E tB hat RI ag /IC e c I 401( ohork t )i dat n 1996. abas e up Simdat ilare ly ar , teh pos e sh tar ed e h of er a ess oe n EB ts thR atI t ’hes s websi e young te and er 401( herek ) 2015,” the latest update of the original 1999 joint study, which analyzed 1996 data. The new study— on I parti C cI i’ pan s websi ts hav te. e a llocated to company stock has fallen, from 17 percent in 1996 to 5 percent at year-end drawing on 20 years of data analyzed in the EBRI/ICI series of annual studies on 401(k) participants’ 2015. activities—permits a cross-generational comparison of 401(k) investors in their 20s, by providing 2015 ### data that can be compared with the EBRI/ICI 1996 data for the same age group. I nstead, younger 401(k) participants have invested their assets much more heavily in balanced funds, w The hich Em inc plo lude yee B taene rgetf- idat t Res e f eunds arch . A Ins t y titea utr e- end 2015, 54 is a private, nper onpar cent ti s of an, non assets pro forf ipar t retse icia pant rch i s i nst n itthe utier bas 20sed i wen re i W nv ashi ested ngt ion, D n balanc C, tehat d f un foc ds, uses much of on heal tha th, s t (4 avi 7 pe ngs, rce re ntt) i rie n m tent arg, and et-dat ec e fon und om s. I ic n 1996, par security issue ticis. pa EB nts i RI do n the es ir no t 20 lobby s alland do ocated on es no ly 8 t take per ce pol nti of cy p the osi ir ti 401( ons. Th k) p e wor lan as k of set s EB to ba RI ils ma ancede po d funds ssibl (tar e by get - fundi date n fund g from s wer its mem e not bers and spon reported se sor par s, whi ately ch i in t nhe d cludat e a br abasoa e bef d ran ore 2 ge o 006) f pub . lic, private, for-profit and nonprofit organizations. For m ore information go to www.ebri.org. These trends also are mirrored among all age groups in the database. Overall, allocations to company The stock In dec vesrtea ment sed C from om pan 19 pe y Inst rce in tu t i ten 1996 (ICI) it s t o 7 he per lead cein ng t in 2015, a association lloca retp io re ns sent to equ ing r it ey gul funds de ated funds crea gl seo d bal from ly, i 53 per ncludi ce ng m nt in ut 1996 ual fund to 43 s, epe xcrhange cent in 2015, -traded f and b unds ( alET ance Fs) d, cl funds osed inc -end reas funds, ed from and un 7 per itce inve nt of stm aen sse t tts rus in 19 ts 96 t (o 25 p UITs) i er n t cent he Un in 2 it015. ed S tates, and similar funds offered to investors in jurisdictions worldwide. 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In 2015, only 7 percent of these young participants had no equity allocation in their 401(k) plans. Moreover, 75 percent of this group had at least 80 percent of their 401(k) balances invested in equities in 2015, due in large part to the increased utilization of target-date funds.” Target-date funds Are Popular Investments in 401(k) Plans The new EBRI/ICI study confirms that target-date funds continued to be popular in 401(k) plans among all ages, and particularly among recently hired participants, at year-end 2015. The EBRI/ICI 401(k) database shows that investments in target-date funds increased in 2015 to 20 percent of assets, up from 5 percent at year-end 2006, and that nearly half of the 401(k) participants tracked in the database held thes e 1196 E funds. 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