Key Findings:
This paper provides an update of a longitudinal analysis of 401(k) plan participants drawn from the EBRI/ICI 401(k) database.
Because the annual cross sections cover participants with a wide range of participation experience in 401(k) plans, meaningful analysis of how 401(k) participants’ asset allocations evolve over their lifecycle must examine the asset allocation of 401(k) plan accounts of participants who maintained accounts over all of the years being studied (consistent participants). A few key insights emerge from looking at the 3.7 million consistent participants in the EBRI/ICI 401(k) database over the four-year period from year-end 2016 to year-end 2020.
- Consistent 401(k) participants’ exposure to equities was relatively unchanged between year-end 2016 and year-end 2020. At year-end 2016, 92.9 percent of consistent 401(k) plan participants held some equities (equity funds, target date funds, non–target date balanced funds, or company stock). This was little changed at year-end 2020, with 94.3 percent of consistent 401(k) plan participants holding equities. Movement toward holding some equities was highest among participants in their twenties: 91.1 percent held equities at year-end 2016, and 96.5 percent held equities at year-end 2020.
- Older consistent 401(k) participants increased their exposure to target date funds between year-end 2016 and year-end 2020. At year-end 2016, 56.5 percent of consistent 401(k) participants held at least some target date fund investments in their 401(k) accounts, and that share increased to 58.9 percent at year-end 2020. The net movement toward target date fund use over the period occurred among consistent 401(k) participants in their forties, fifties, and sixties. Participants in their twenties had the highest use of target date funds in both periods but experienced negligible net change.
- Most consistent 401(k) participants who were fully invested in target date funds at year-end 2016 remained fully invested in target date funds at year-end 2020. Among consistent 401(k) plan participants who were fully invested in target date funds at year-end 2016, more than three-quarters remained fully invested in target date funds at year-end 2020. This high level of persistence in target date fund investing was observed across all participant age groups.
Figure 2 lp Ho p C ar er er hang g lc c d est I en en en n t tv ,i n e at eq Se c s ar rt u s ye ease m ah i tin ar ies e , n -J sen ac t C al : O 9 lo d k o1 p c ns 2 Va .at t 1 0i o 2 n ip is o0 n D er n s er t ( — c F e en h i5 g nt ei .u t 5, r o e p an 4 f er 5 t0 d h ). c em en 1 S A t( even m t k) h o oel fn td g P h B ieq p a as sar r g u st tri.ito ic c i2 es u ip 0 ip pan 2 at at 1ant t. s ye y “ T ear in ar ar s t-’h g -en en ei et Ar d d ll Dat t 2 w 2 o 0 0 en c 1 e 1at 6 6 F t,i u es, an an ions nd d d 3 s : 7 3 t h ..E 5 6 at vid t p p o s er er en hT c c ar c en en ar e e ttPo ig n at hc e el i r ny eased t d tear s Da nto o- en tG t ar te ro d o g w 9 2 et Fund 6 0 in .2 d 5 g 0 at p P w e er os er p fcu u en e n l ar d 1 ts 0 iat t 0 y at an d Sarah Holden is Senior Director of Retirement and Investor Research at the Investment Company Institute (ICI). Figure 1 Domestic Stock and Bond Market Indexes 12 Account balances are net of unpaid loan balances. Thus, unpaid loan balances are not included in any of the eight asset year B year per ecten - -w en en te d diAp n e 2 2 ves n 0 0 p1 2 ro 6 0 t2 ed p , . 0 rc S io at 1 m in m 6 e al eq p lU er ar and u s e e it id n ie b cs w y r eases 2 i(4 tF h 0 0i g 12 3u (3 k) 0 r.w e9 er Pl 4p)an e er . T o c Par h b en isser t t n iat ve cet i pd year an c h ac tan sr-.o en ” gse I sd CI r te 2 hf0 R e lec 2 ese r0 em t.s ar 2 ai c .n 2 hi n p Per g er a c sg en pe ec tg tm r ive oo uvin p 2s 7.g , n ao w.ay 7 an frod m E tBhR e I 1I0 ss 0u p eer Bc ren ief,t no. 537 Steven Bass is an economist at ICI. Craig Copeland is the Director of Wealth Benefits Research at the Employee Average Asset Allocation of 401(k) Plan Accounts by Participant Age 13 In the EBRI/ICI 401(k) database, investment options are grouped into eight broad categories. cChan ategories ges describe in d. 401(k) Plan Asset Allocation Among Consistent allocation (S tep o s to em met ber hi)n . g Avail lessab , 4le .2 at p er wc w en wt. ic m i.o ovin rg/g sy tsot em a 1/0 fi0 les/ per 20 cen 21t- 0 al 9l/opcer at2 io 7n -0 , 7 an .pd d f3 an .3 d p er wc w en w.teb str ic i.kin org g/ d w oic th s/ 1 d0 ef 0au per lt-cent Percentage of 401(k) plan account balances Betw Been enef yiear t Re -en sear d c 2h 0 1 In 6 san titu dt e year (EB -en RI) d. 2 T0 h2 an 0, kc so tn os iA sd ten am t 4 B0 en 1(sk) im p har ont,ic E ip Ban RIt sd’ at us ae co ofm tp ar lig an etc e dat an e df u IT n ddsi riec nctroea r, sfed or ,d w atitah 1 Month-end level Figure 3 allocation s otu or e ce/ queb ities ri-is in s ubeo-tb hr i2 e0 f/1 eb 6 ran i_id b _ 25 03 27 0_ . 4In 01 o kt th der fs- w 9soep rd2 s,1 .60 pd fp. er cent of consistent 401(k) participants with their 13 tabulations. This Issue Brief was written with assistance from the Institute’s research and editorial staffs. Any views P moar re ptici articippan ants mots vin, 20 g into t16 han o–u20 t of t20 hese funds, on net. At year-end 2016, 56.5 percent of consistent 401(k) This system of classification does not consider the number or types of distinct investment options presented to a given 250 Consistent 401(k) Participants' Investment in Equities and Target Date Funds • Equity funds consist of pooled investments primarily invested in stocks, including equity mutual funds, bank October 25, 2023 • No. 594 Year-end 2016 401(k) accounts fully invested in equities at year-end 20F 16 ig u w re er 5 e fully invested in equities at year-end 2020. partiex cippan ress ts e hd el id n at th ilsea rep st o so rtm ar e et ar thg oet se doat f e th fe un au d tih no ves r an tm den shto s uin ld tn ho eitr b4e0 1 as (k) cri b ac ed co tu on tth s,e an ofd fi cter hat s, s trhuar ste ees, inc ro eas r oed ther to 58.9 participant, but rather, the ty Ppes erceno ta f go ep otfi o co nns sic sh teo nsen t 401 by (k) pa partrit ciic pia pan nts t bs y. aPl gea ,n y Sp ear-o en nd s o 2r 0 C 16o au nn d c yie l o ar-fe A nd me 20r 2i0 ca 2021 indicates that in collective trusts, life insurance separate accounts, and other pooled investments. 401(k) participant analysis By Sarah Holden, ICI; Steven Bass, ICI; and Craig Copeland, EBRI ICE BofA US Corporate Index. Atlanta: ICE Data Indices, LLC. Balanced funds Changes in Allocation to Target Date Funds Among Consistent 401(k) Participants sponsors of EBRI, Employee Benefit Research Institute-Education and Research Fund (EBRI-ERF), or their staffs. percent at year-end 2020, with the net increase occurring across participants aged 40 or older (Figure 3). In both 2020, the average number of investment fund options available for participant contributions was 21 among the 518 plans 2, 3 • Sim ilarly, bond funds are any pooled account primarily invested in bonds. All age groups in the sample of consistent 401(k) participants had some G m ICs ove a m nd en t to full allocations to equities Percentage of consistent 401(k) participants by age, year-end 2016 and year-end 2020 Consistent 401(k) plan participants holding equities 200 yearN s,ei yo thu er n gEer BR 4I0 n 1o (k) r E p Bar RIt-ic EiR pan F lo tsb w bier ese om r t oak re es lik p eloys itto io n ho s ld o ns o sp mec e itfar ic g pet ol id cy at p e ro fu pn od s al insves . EB tm RI en intvit s, e cs o m co pm arm ed en w t io th n o th ldis e r surveyed. BrightScope and In Targe ves t da tmen te t Company Institute 2023 reports an average of 28 iC nom ves pa tm ny en t options in 2020, and an M emo: Changes Equ in ity 401(k) P Non–lan target da As te s Bet ond Alloc Money ati othe on A r stable mong Consistent Plan •S poB ns aloan r Co ced u nfc uin l d os f A ar m eer pio co a. led 20 ac 21c. o6 u4 ntth s An inves nual ted S u in r ve bo y th o fs Pr too cks fit S an hd ar b inogn d an s.d T 4 h0 ey 1( k) ar ePl can las ss : ifR ied efl ec int to in g tw 2o0 20 Plan between year-end 2016 and year-end 2020. For example, 3.3 percent of consistent 401(k) participants in their twenties 1, 2 2 4 Year-end 2016 Age group funds funds balanced funds fun Wds ilshire funds value funds stock Other Unknown equities av par er tiage rcesear ipan oft s c 20 : h .6 in 6ves .1 p tme ercn en t o t p otfio cnos nw sih st en en a t 4 tar 01 g( et k) da par te tfu icin pd s ant usi tie n is thcei ou r n tw ted enas ties a s hiad ngl e tar ing ves et td men ate tf u on pd tio s nin . their 401(k) Changes in 100 percent allocation to target date funds Introds Euc u xb pc er tat ion ien egco er.ies: Ch itcar ag go et : Pl dat an e S fu pn od ns s oan r C do n uo nn c– il to ar f g Am et er dat ice a.b alanced funds. Participants, 2016–2020 had 100 percent of their account invested in equities at year-end 2016, compared with 6.9 percent at year-end 2020 5000² Year-end 2020 20s 25.6% 58.2% 2.1% 3.4% 0.3% 1.6% 2.0% 1.8% 5.0% 80.6% accounts at year-end 2020, compared with 56.8 percent of consistent 401(k) participants in their sixties. Nevertheless, 1 2 14 • A target date fund typically rebalances its portfolio to become less focused on growth and more focused on T (F h iLi g e u fe Erst B e R y 150 4lIe )./ fICI At un ds th 4 e ma 0 o 1t( in h k) ter ai d n en at a ab dp ro a ed fs e, tet h e e w rag h mic ie n h ed sip s r ec c isk otn r u lsev t m ru el , c ctan o ed nd s figen s ro te m n e trt al h 4le 0 y 1ad u (se k) m p w inar o isrttds ircat ip su ian ve ch tr s a ec is n “ o trch d oei s n s r oer fs i4 v xat 0 ti1 es ive (k) ,al ” “ p so lm an m os do ,er ved rep ate r,tesen ”o o1 r0 t0 s a 30s Suggested3 C 5.i 0t % ation: 4H 5.o 8l% den, Sarah 2.,8 % Steven Ba4 s.s 9,% and Cr 0ai .7g % Copelan2d .9 , % “Changes 3 in .7 % 401(k) Pl 2.6 an % Asset1 Al .6% location 80.8% 100 percent Moved away from Remained at 100 Moved to 100 Net 100 percent By Sarah Holden, ICI; Steven Bass, ICI; and Craig Copeland, EBRI the largest net movement toward target date fund use over the period occurred among consistent 401(k) participants Wilshire 5000. Santa Monica: Wilshire Associates. income as it approaches and passes the target date of the fund, which is usually included in the fund’s 40s “ lar aggr ge ess croive” ss s iec n t tiho 4ei A 4 n .ge r, 0 n % oam r sn eap tio n 3s i 1 2 h n .0 5o di 1 % t 6c , aotfe 14 0 th 0 0 e 1 pe (fk) 3 u r.cn 2 e% d’s p nt lan by ris sk 2 at 0 2 lev 0 th 6 el e .5 . L % en if pe d est ro cy f e lnt 0 e e .ac 9fu %h n ds ye pe gen ar rc.e e It nt 4r .a 5 iby s l% l y a 2 a 0c 2 rr e 0oisns c c ha ls uec 4 ded ng .9t% e io in n t oh fi n et no h 2 30 .e 1 2 % n 0 en –ttar ire get p 1o da .3p % utle ation 7 o7f. 0% percent concentrations in equities: 5.3 percent of consistent 401(k) participants in their sixties had 100 percent of their 96.5% Among Consistent Participants, 2016–2020,” EBRI Issue Brief, no. 594, and ICI Research Perspective, vol. 29, no. 8 96.3% 95.1% 94.0% 94.3% 94.0% 94.3% 92.2% in their forties, fifties, and sixties. Participants in their twenties 93 .3 an %d thirties 91s .4 aw % similar exposure to target date funds in 92.9% 91.1% 50s 420s 4.6% 5 27 4..8 9% % 3 -.1 7 5% .2% 8.2% 42.6% 1.0% 67 ..80 % % -8.5 4.% 7% 493 .4 .4 % % 1.3% 68.8% balanced fu nam nde. c ategory. 4 01(k) plan participants, and it represents a wide range of participants—including those who are young and individuals account invested in equities at year-end 2016, compared with 6.3 percent at year-end 2020. (October 2023). 8 both year 100 s. 60s 330s 8.7% 4 27 4..4 7% % 3 -.1 8 0% .8% 10.8% 36.6% 1.2% 4 1.0 6.% 6% -6.4 2.% 9% 414 .2 .0 % % 1.3% 14 57.3% Key Findings: • Non–target date balanced funds include asset allocation or hybrid funds, in addition to lifestyle funds. who are new to their jobs, as well as older participants and those who have been with their current employers for many 15 5 GICs are insurance company products that guarantee a specific rate of return on the invested capital over the life of the All cons E isnd tent sn am opt lees 440s 1.8% 3 23 7..4 4% % 3.-6 8% .6% 8.6% 24.8% 1.0% 37 ..56 % % -5.5 1.% 1% 283 .3 .6 % % 1.3% 67.2% Few consistent 401(k) participants had none of their 401(k) balances invested in equities, and slight net movement 3 • C opCo yrig mh pan t Iy n f so to rc m k a is t ieq onu:i tT yh iin s trh ep e o 4r0 t 1is ( k) co p plyr an ig ’sh s ted po n bsyo r t h(e thE e m em plopye loyer e B) en . efit Research Institute (EBRI). You may years. ICE BofA US Corporate contract. 50s 28.3% -5.6% 22.7% 3.3% -2.3% 26.0% E Th viisd p en apc er e p orf oR vid eal es lan oca ut pid on ate Aocft a iv liotn yg t ito ud or in al fr an om alyT sa isr o gfet 40 D 1( ak) te pF lan un p d ar st A icim pan on tsg d Con rawn s ifs ro ten m tth 4 e 0 E1 B(k RI/) ICI 401(k) aw ay from that zero holding occurr ed between year-end 2016 and year-end 2020. To have zero investment in equities, Index³ c • opy, Mo pn riey nt, fo urn d do s w co nn losad ist tohfi st hro ep se orftu s no dls el d y esi fog r n ped ers toon al m ai an nd tai nno a ncsotm ab m leer sc hiar al e us pe, ric p e. r ovided that all hard copies retain 1 50 60s 29.5% -4.7% 24.8% 3.2% -1.5% 28.0% Year-end 2020 The Employee Benefit Research Institute (EBRI) is a nonprofit, nonpartisan, public policy research organization that does not P 16articipants Al dat thab ou as gh e. an nual updates of the EBRI/ICI 401(k) database provide valuable perspectives on 401(k) plan account the 401(k) investor would have allocated none of their 401(k) balance to equity 15 funds, target date funds, non-16 target Other stable value funds include synthetic GICs, which consist of a portfolio of fixed-income securities “wrapped” with a an • y S an tab d al le l valu copyr e ip grh otd an uctds ,o s th uer ch a as pp g liu cab aran le tn eed otic es inves cot nm tai en ned t c otn hter rac eitns, (an GICs d y) ou an ma dy octih te er o s r tq ab uo let evalu sme al f l u pn od rs ti,on s ar o e f All 34.6% -7.5% 27.1% 3.7% -3.8% 30.8% Balanced funds lobby or take positions on legislative proposals. d bal atan e b cal es, anas ced set f u al nld os c,at oio r n c,o m anpdan loyan st o ac ck. tivit Ay nal ac yr zo in sg s w thie de g rco ro us ps osfec co tin os nis s to en f tp ar 40t1 ic(ik) pan ptar s,t ic crip oan ss-ts sec att io year nal -an enal d y2 s0 es 2 0ar , t eh n eo t guarantee (typically by an insurance company or a bank) to provide benefit paym 2, 3ents according to the plan at book value. As with equities, movement in the concentration of target date funds in 401(k) participants’ accounts results from the rrep epo orrtt ed pro a vid s o ed ne th cat ateg yo ou r y. d o so verbatim and with proper citatioG nI.C An s y au nd se beyond the scope of the foregoing Because the annual cross sections cover participants with a wide range of participation experience in 401(k) plans, well suited to examining Ta thre ge im t da pac te t of consistent participation in 401(k) plans. Cross C sec omtpa ion ny s change in composition Memo: data show that 1 Equ .4 ip tyer cent, on net,N m ono –ved targe a C t w ha da ay ng te efr so in m Bon z e ar d o zer allo oc M eq aon tiu on eit y it es o t aal rot ge lo he tc da at r sitto e a n bl fun — e ds 7.1 percent of this group had no 2 changes in 0 asset values, in addition to reallocation activity by participants. Although information on specific trading 17 The r •eq Inu vT est irh es e men o Et BhR ter C I’ o sc mpa at preg ion ro y e ry I xn pis s rtes itth use t e p rer ( esid IC m I) iu s is al s io tfn h oe .r F lo ead otrh er p in er g in m ass ve iss s oitc o m in at en si,o tp ns r l,eas e spr ue ceh sen c o as nt tir n ac e gal t r E eegu B sR tat lI ate at ed f u i pn n er d ves m s.i tsmen sionts fu @n eb dsr.i ICI .org’s . mission is Some recordkeepers supplying d 1, 2ata were unable to provide complete asset allocation detail on 2 certain pooled asset classes 4 meaningful analys fun is ds of how fun 4ds 01(k) p ba ar lt ainc cip ean d fun ts’ds asset fun alds location fun s ds evolve vo aver lue ft un hei dsr lifecyc stoc lek must e Ox ta he m rine U th nk e no aw ss net equities Age grou p Zero in Moved away from Remained at Moved to zero Net Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 9 Dec-20 Dec-21 Dec-22 eq frou m it iye es ar at tyear o ye- ar en b dec 2au 01s 6e , 2 0an ts he d s5el .7 ec p ter ion c 30 en o sft dhat ad a n po ro eq vid 40s uer itis es an at d year sa5m 0s- pen le d o f2 p 0l2 an 0 s 6( 0 Fu sig siu nrg e a 4 )g.i ven Th Ails lp n ret ovid ch er an vgar e y, refan lec dt s b ec 3.4 au se 17 ac to tst ivit ren y g otfh 4 en 0 1 th (k) e fo par untdat icipio an n to sf t ish n e oatsse avail t m ab anle ag in eme the ntE iB ndu RI/ sI tCI ry f4 o0 r t 1h (k) e ul dtat ima abtas e be e,n efi it its op f ots hs e ib lo le ng to -t er ob m ser inve divi ac du tal ivit in yve aw stay or. • The final category, unknown, consists of funds that could not be identified. for one or more of their clients. The final EBRI/ICI 401(k) database includes only plans for which at least 90 percent of all plan Age 2016 zero by 2020 zero by 2020 change Zero in 2020 20s 33.1% 53.4% 4.4% 4.5% 0.3% 1.1% 1.2% 1.4% 0.7% 86.4% allocation of 401(k) plan accounts of participants who maintained accounts over all of the years being studied 4 401(k) plan participant age I 4 t0 s 1mem (k) p ber arts iciin pcan lude ts jmu oint u oal r fu leanve ds ,p ex lan cs h.an In ge -ad tra dded itio fu n, n ex ds am (Ein TiFns) g, cch lo an sed ges -en in d fu agngds reg , a at nd un e ass itet in ve allst ocment ation t r am usto s n(g UIT ths) e en in ttih re e percen Retp m oo rtvin Av gail fro ab m il zier ty o: eq Thu is it ires ep t oor tat is lavail east a sb olm e e, on 2 t.h 0e p ier ntc er en nt et m at ovin ww gw fr.o eb mr is .o orm g e to zero, and 3.7 percent sticking from or tA on n 10 ua 0l p per erc cen entt o ch r azn er go e itn ar to gta etl r deat tu er n fu in nd de h xoldings at year-end. Among consistent 401(k) participants between 20s 33.6% -10.3% 23.3% 10.6% 0.3% 33.9% assets could be identified. 30s 38.8% 44.6% 4.0% 5.0% 0.6% 2.2% 2.2% 1.9% 0.8% 84.0% (consistent participants). A few key insights emerge from looking at the 3.7 million consistent participants in the United States, and UCITS and similar funds offered to investors in other jurisdictions. ICI also represents its members in their Wilshire 5000² d wat ith ab zas ere o m ho ay ld in ng eg s liec n tb o im th p o 2r0 tan 16t an var d iat 20io 2n 0 . in Wh acilte ivit thy e aym ou on ng gest ind 4 ivid 01u (k) al p par art tiic ciip pan ant ts s .w Ter o e ex m po lorre e lt ikel he yf u tlo l s m co op ve e too f o hn og ldoin ingg year-end 2016 an 30s d year-en 3d 5. 6 2 % 020, few m-o 8.ved 5% to, or away2 7 fr .1 o% m, these ext 8r .8 e% mes of tar 0g .3et % date 3 fu 5.n 9d % holdings. 40s 46.7% 32.8% 2.3% 6.9% 0.9% 3.9% 3.4% 2.3% 0.9% 77.4% Consistent 401(k) plan participants holding target date funds capacity as investment advisers to certain collective investment trusts (CITs) and retail separately managed accounts (SMAs). EBRI/ICI 401(k) database over the four-year period from year-end 2016 to year-end 2020. For all of the figures in this report, components may not add to the totals presented because of rounding. p articipation in 401(k) plans and to understand how 401(k) plan participants have behaved over recent years, it is some equities than 40s older 40 431 .2 (% k) participan -9t.s 5, % the oldest gro 33u .7 p% of 401(k) p8 ar .2t % icipants al -1s .3 o% displayed 41.9 % slight reallocation 50s 44.7% 28.6% 2.8% 8.8% 1.0% 6.6% 4.0% 2.7% 0.8% 67.1% ICE BofA US Corporate References ICI has offices in Washington DC, Brussels, and London, and carries out its international work through ICI Global. Index³ 50s 47.1% -10.2% 36.9% 5.7% -4.5% 42.6% 60s A substantial shar 38e .8% of cons2 is 8t.en 1%t 401(k) p 3.ar 4% ticipants 1h 1ad .1% their en 1.4t % ire 401(k) 10 .b 0al %ances inve 3.7s % ted in t2 ar .8g %et date 0.f 9u %nds, an5 d7 .0% important to analyze a consistent group of participants (a longitudinal sample) who have been part of the database for activity away from a zero equities allocation. BrightScope and Investment Company Institute. 2023. The BrightScope/ICI Defined Contribution Plan Profile: A Close • Consistent 401(k) participants’ exposure to equities was relatively unchanged between year-end 5 31.0% 60s 46.7% -9.1% 37.6% 5.6% -3.5% 43.2% All cons istent sample 5 42.9% 30.8% 3.0% 8.6% 1.0% 6.5% 3.6% 2.6% 0.9% 68.3% some net movement a6w 6.ay 4% f6r6 o.m 1% that full concentration occurred between year-end 2016 and year-end 2020. Analyzing 3 an extended period—in this case, y6 ear 4.4- % end 2016 through year-end 2020. For the results of the year-end 2020 updat 64e .1o %f the EBRI/ICI 401(k) database, see Holden, Bass, and Copeland 2022. Look at 401(k) Plans, 2020. San Diego, CA: BrightScope, and Washington, DC: Investment Company Institute. 2016 and year-end 2020. At year-end 2016, 92.9 percent of consistent 401(k) plan participants held some All 43.5% -9.4% 34.1% 7.0% -2.4% 41.1% 58.9% Table of Contents 58.1% 57.4% 56.8% the group of consistent 401(k) participants at year-end 2020, the data show that 3.8 percent, on net, moved away from 56.5% 56.8% 4 Available at www.ici.org/system/files/2023-09/23-rpt-dcplan-profile-401k.pdf. equities (equity funds, target date funds, non–target 5d 2at .9% e balanced 53. 3f% unds, or company stock). This was little Because of these changes in the cross sections, comparing average account balances across different year-end cross- 1 In troduction .......................................................................................................................................................... 3 21.0% A targeta S da a 1 temp 0 f0 un p dl e er typof c ica en llCon yt re tb ar als g ai n et s ce t sd en at its t e p o4 f rtu f0 on l1 id o (k to al b) le oco P cat m ae r io t le n is c — si p f3 oa cu 4nt .s6 e ds p o ,er n 2 g c0 ro en 1 wt t6 h o – af n2 dt h 0 mi2 o sre 0 g fr oo cu u sp e dat on ye in 2co 0 ar .8 m- % e en asd i t 2 a0 pp1 ro 6a ch an ed s a3 n0 d .p8 a sp ser esc then e tt a rg at et year date o- f en thed fu nd, which Note: A target date fund typically rebalances its portfolio to become less focused on growth and more focused Figure 4 changed at year-end 2020, with 94.3 percent of consistent 401(k) plan participants holding equities. Movement is usuallsec y incl tiuo dn ea d li s n tn hapsh e fundo ’st s nac m an e. lead to false conclusions. For example, newly formed plans would tend to pull down the average on income as it approaches and passes the target date of the fund, which is usually included in the fund’s 2020 only held target date funds (Figure 5). This net change reflects 7.5 percent moving away from the 100 percent 16.1% 2 Fed Ser am alp R leeser of Co ve nE sc isotn en om t C 4 ic h 0 a 1 Dat n (k) ga e Par s( F in R t iE A cD) ilp lo an .c S a tts t. i,o Lo 2 n0 u t1 o i6 s E :– q 2 Fu ed 02 iter 0 ie ................................ s al A R m eo ser ng ve C o Bn an sk iso tefn S t t4 ................................ . 0 Lo 1(u ki)s P . articipants ........................... 3 Among the 401(k) participants with accounts at the end of 2016 in the EBRI/ICI 401(k) database, 3.7 million are in the Not all p articipants are offered this investment option. toward holding some equities was highest among par 1t 4i.c 2i% pants in their twenties: 91.1 percent held equities at account balance bu natm w e.o Fu uld t ndsel inl us clude n o mtuh tu in ag a l funb do s,u b ta c no k n csi ols letcen tivt el y tr upar sts,t ilc ife ip iat nsiun ra g w nceo sre ke parrs a.t Si e ami ccola un rlty s, , a tn hd e aagg ny pr oeg oleat d e average account 6 Percentage of consistent 401(k) participants by age, year-end 2016 and year-end 2020 3 allocation to something less, 3.7 percent moving to a 100 percent allocation, and 27.1 percent sticking with 100 percent GICs are co gn ua sra isntten eedt is nv am estm pl ee. nt co T nh tra ese cts. consistent participants had accounts at the end of each year from 2016 through 2020; they investment product primarily invested in the security indicated. The consistent sample is 3.7 million 401(k) plan Factoryear s Det -en erm d i2 n0 in 1g 6 ,Ch an an d g 9e 6s. 5in p Co ercn en sis t th en eltd 4 eq 01u (k) ities Par at t ic year ipan -ten s’ d As 2s0et 20 Al . locations ................................................... 4 balance would tend to be pulled down if a large number of participants retire and roll ov 9er .8% their account balances. For analysis 4 Holden, Sarah, Steven Bass, and Craig Copeland. 2022. “401 (k) Plan Asset Allocation, Account Balances, and Loan al location to target pa rtd icat ipa en tfsu w nid ths a icn c ob uo ntt h ba 2 la0 nc 1e6 s an at td he 2 e0 nd 2 0 of. eIn ac ho yte haer r fr o w mo 2 r0 d1s6, t7 hr8 o up gh er 2c 0en 20.t A o gf e c go ron us p is ist en baste d 4 0 on 1 ( th k) e participants with Equities include equity funds, company stock, the equity portion of target date funds, and the equity portion of non–target date balanced funds. make up a longitudinal sample, which removes the effect of participants and plans entering and leaving 6t.h 9% e database. 6.5% of changes in consistent 401(k) plan participants’ account balances, see Holden, Bass, and Copeland 2023a. 5 participant's age at year-end 2020. Changes in Consistent 401(k) Participants’ Allocations to Equities Between 2016 and 2020 ......................................... 5 Activity in 2020.” ICI Research Perspective 28, no. 11, and EBRI Issue Brief, no. 576 (November). Available at Asset at llh oca eitr io 4 n 0 by1 a(gk) e gac rouc po is u a nm ts o nfg u tlhly e co innve sisstt eed nt s ain m ptlar e og f et 3.7 d mat illie onf 4u 0n 1(k) ds pat lan year partici-pen antd s w 2i0 th1 a6 cco w uer nt b e alfau nlce ly si a ntv thest e en ed d o i f n e at ch ar yg ea et r f ro dm at 2e 01f6 u n thd ros u gat h 2 020. Over this period, the consistent participants’ aggregate allocation to equities was relatively unchanged, from 67.2 • Older consistent 401(k) participC aha nt ng s e in s icr n 1 e0a 0s pe ed rc e tnt he ailr loc eax tip on o s to ue rqu e t ito ie s target date funds between year- Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project 5 For a mw orw e w de .it ca i.io lerd de g/filsc esr/i2 pt 0i2 on 2 o /pfer th 2e 8 -2101 1.6 p– d2 f 0an 20d l o w nw giw tu.d eib nral i. s oram g/d po lec,s s /ee defH au ollde t-sn o,u B rass ce/,eb an rid -is Cso up eel -b an rief d 2 /eb 02r3ia _ib an _d 2 576 0_ 2k 3-b. year-end 2020. Note: FundsE ivid ncluen de c me utu oafl fR un eal ds,l o ba cnat k co ioln le ct Ac ivet itvit rusy ts, tlo ife o inr s ufr rao nm ce s Eeq pu ara itites e a cco Am uno tsn , g an Co d an n ys pis oo ten led ti n4 ve0 s1 tm (k) en t P pro ar dt uict ci p prian matri sl y................................ invested in the security indica..... ted. A 6 g e percent of 401(k) plan assets at year-end 2016 to 68.3 percent at year-end 2020 (Figure 1). Over the same time end 2016 and year-end 2020. At year-end 2016, 56.5 percent of consistent 401(k) participants held at least group is based on the participant's age at year-end 2020. Percentages are dollar-weighted averages. 100 percent Moved away from Remained at Moved to 100 Net 100 percent xsec-29nov22.pdf. 6 20s 30s 40s 50s 60s All period, their allocation to target date funds increased modestly, from 27.4 percent of aggregate 401(k) plan assets to This number is lower than it would have been if it merely reflected employee turnover and retirement. For example, if 401(k) Changes sio nm Ce on tar sis gtet en d t at 40 e1 f(u k) n d Par intves iciptan men t-s 2’t . 2 s Al % iln o ctat hei iorn 4 s0 t1 o( k) Tar ac get co u Dat ntse, F an un dd ts h at Bet sw har een e in 2c 0r1 eas 6 an ed d t2 o0 5 28 0. 9 ......................... percent at year- 8 in 2016 100 percent by 2020 100 percent percent by 2020 change in 2020 Source: Tabulations from EBRI/ICIA Pa ge rticipant-Directed Retirement Plan Data Collection Project Al l age groups in the sample of consistent 401(k) participants had some net movement away from full allocations to 401(k) plan participant age -5.3% 3 pl0 an .8 sp per on cs en orts. c hange their service providers, all participants in those plans would be excluded from the consistent sample. 20s 3.3% -1.2% 2.1% 4.8% 3.6% 6.9% end 2020. The net movement toward target date fund use over the period occurred among consistent 401(k) Holden, Sarah, Steven Bass, and Craig Copeland. 2023a. “What Does Consistent Participation in 401(k) Plans Generate? t arget date funds between year-end 2016 and year-end 2020. However, the largest movements were for younger Evidence of Reallocation Activity to or from Target Date Funds Among Consistent 401(k) Participants ..................... 8 30s 4.2% -1.6% 2.6% 3.6% 2.0% 6.2% About the2 E 01 B 7RI/ICI 401(k) D 20 a 1t8abase 2019 2020 Note: Equities include equity funds, company stock, the equity portion of target date funds, and the equitC y o po m rtp io on u nd average 7 participants in their forties, fifties, and sixties. Participants in their twenties had the highest use of target date The InvCh estan men ges t C in ompa 401n (y k)I n Pl san titu Ac te c tr oau cn ks t r Be al al an loc ca etsi,o n 2 0 o1 f 6a– c2 co 0u 2n 0t. ba ” IC lan I R ces es a ear nd ch c hP an erge sps ec to ti ve the 29 ass , n eto a . l2 lo , can atid o nE B ofR I Issue investors, who were much more likely to be fully invested in target date funds in both years. For example, 57.8 percent annual growth rate, 2016– of non–target date balanced funds. A target date fund typically rebalances its portfolio to become less focused on References ................................ 40s 5.7% ................................ -2.2% ................................ 3.5% 5.8%................................ 3.6% 9.3% ...........................10 funds in both periods but experienced negligible net change. Factors Determining Changes in Consistent 401(k) Participants’ Asset Allocations contributiB ornief s f,o n r a o. sa 58 mpl 2 (e Mo ar f r ch ec ).o rA dkee vailab pelres. at Th w e w su wr.vey ici.o rre gsu /slys ts tie nm di/ cfailtes/ e a 2m 02 in3 o-r0 it3 y/ o pfer D 2C 9 p -0 lan 2.p par df an ticid pan ts 2020 change their asset of consistent 401(k) gro p war th taic nd ip m an ore ts fo icu n st eh dei onr it nw coen met a ies s it a hpad pro a1 ch 00 es p aer nd c pen asste s o f th e th taei rgre tac dac teo ou f n tht e ifn unve d, s wt hed ich iisn u s tar uag llyet date funds at 50s 6.4% -2.6% 3 .8% 3.7% 1.1% 7.5% The EBRI/ICI project is unique because of its inclusion of data provided by a wide variety of plan recordkeepers, included in the fund’s name. Funds include mutual funds, bank collective trusts, life insurance separate E ndnotes .............................................................................................................................................................11 allocationw in w a wn.y eb gi riven .org per /puio bd. lic F atoio r n ex s/armp esear le, c 1h 0-.6 p u per blic cat enit o n os f /D isC s u pl ean -b pa riefrst/ iccio pa nn ten ts c t/h w an hat ge-d t doh ee s-a csse onsti satlen loctat -pio ar nt o icfi t pat heiio r a n-cin co -unt year-end 2016, compared with 49.4 percent at year-end 2020 (Figure 5). At the other end of the age spectrum, 60s 5.3% -2.1% 3.2% 3.1% 1.0% 6.3% Changes in 401(k) plan asset allocation are determined by three factors: permitting the aan cco al uys ntsi,s a no df at nh y e poac olet di vit inve ys to mfe p ntar pro tidcuip ct an prim ts a riin ly i4 nv0 e1 st( ek) d in p thlan e ss ecu orift yvar indiyin categ d . s Tihzees co— nsf isro tem nt s ver ampy le large 1 • A M ll io nds et x ec so an res sies t t toe 1n 0t 0 i4 n 0 De 1 ce (k m) b ep r ar 201t 6ic . ipants who were fully invested in target date funds at year-end balances, and 6.3 pe Arlc l ent changed 5.5% the asset al-l2 o.c 2at %ion of their 3c .o 3% ntributions i 4n .2 % 2020 (see 2 H .0% olden, S 7c .5 h% rass, and Chism 2021). 401(k)-plans-generate-changes-in-401(k)-plan-account-balances-2016-2020. consistent 401(k) piar s 3t .7 ic m ip ilan liont s 4 0i1n (k) th plei anr ps airtx ici tip es an tal s w sio th m acco oved unt b aa la w nay ces f ar t o thm e e 1 nd 0 o 0f ep aer chc yen ear tf ro cm on 2c 0en 16 tt hrro at uigo hn 2s 0 2t0o . target date funds: corporations to small businesses—with a variety of investment options. 2 Age group is based on the participant's age at year-end 2020. • g 2016 ains o rre lm osain sese o dn ft u hll ey i n in ve vsets m ten edt si n h el tar d g ine t th d eat 40 e1 f(u k) n d pls an a tac yc eoar un -te , nd 2020. Among consistent 401(k) plan F or the m Tho es W t r ile sh cien re 5t0 upd 00 inat dee x c iso av co er m in pg rehte hne sif vier s mt equ asu ar ret e ofr t ho ef 2 US 0s2 to 3ck , s m ea e rke Hto , d lden esig, n eS dc th o r re as fles, ct a thn e d peC rfh orm ism an 2 ce0 o2 f 3 al.l US equity securities 2 9.5 percent of consistent 401(k) participants in their sixties had 100 percent of their account invested in target date Figurte has t h ave readily available prices. Changes in zero allocation to equities Holden, Sarah, Steven Bass, and Craig Copeland. 2023b. “How 401(k) Plan Participants Use Loans over Time: An • contributioSo ns u rce to: o Tarb w ulait tih on d sr a fro w mal EBR s fr I/o ICm I Pa trt hie cipac antc -D oiu ren ctte din R e a tire dm iff ee nr t en Plat n D pa ro tap Co or llt eict oin on t Pro han ject the existing mix of assets, and participants who were fully invested in target date funds at year-end 2016, more than three-quarters remained f 8unds at year-end 2016, compared with 28.0 percent at year-end 2020. Sources and Types of Data For a de 3 tailed analysis of 401(k) plan par Mtov iciepan d aw ts' ayu fse rom o f tR ar eget mai ne dat d e atfu M nov ds eb d y to pa ze rrto icipanN t eage t or job tenure in the year-end The ICE BofA US Corporate Index tracks the performance of investment grade corporate debt that is publicly issued in the US domestic market Analysis of Loan Activity of Consistent 401(k) Plan Participants, 2016–2020.” ICI Research Perspective 29, no. • changes to the assets held inside of the account (including rebalancing and changes in the underlying asset fully invested in target date funds at year-end 2020. This high level of persistence in target date fund investing Zero in 2016 zero by 2020 zero by 2020 change Zero in 2020 Age and denominated in US dollars. 2 Fi0g2u 0r e cr1 o,ss A -ver secag tion ea As l EsBet R IAl /IC loIc 4 at 0i1 o(n k) o da f 4t0 ab 1ase (k) ,Pl san ee H Ac oc lde ounn,t B s ass by ,Par and ti C cip oan peltan Ag d e2 ................................ 022. Among 401(k) plan ........................... participants holdin 4 g E Few vid er en co c 7 n e ,s an io sf ten dR E teal B 4R 0I l1 oca Is (k) s u t p e iar on Btric ief A ipc ,an tnio t vs.i th 5y 9 ad 0 t o n (S o or ep ne t fr e om om f tbher ei E )rq . 4 A u 0vail i1 ti(es k) ab b lA e al m at an on c wes w gw iCon n .ves ici.o s tred ig s/t sien n ys tttar e 4 m g0 et /f1 i l(k d es at /) 2 eP 0f2 a u3 n r-t d0 isc 9 iat /p p a er year nt 29s-- 0 en 7.d p d 2f0 an 20d al was loc at obio ser n ved of fu ac nd rs o,s s s ual ch l pas ar ttiar cip gan et td ag ate e fg urn od usp)s. . Several EBRI an 20s d ICI mem 8.b 9er % s provided- 7r.ec 6%ords on acti1 ve .3% participan2 ts .2 % in 401(k)- 5p .4lan % s for 3w .5h %ich they kept Sources: Federal Reserve Bank of St. Louis, ICE Data Indices, and Wilshire Associates target date funds at year-end 2018, 88 percent held one age-appropriate target date fund (see Holden, VanDerhei, and Bass 10 Figure 2,h D tto pm s:est //wic w 30s w St.o eb ckr ian .ord g / 6 B p .o 0u % n bd li cM at ar ioknet s/ rIn es -4d .ear 0 e% xes ch ................................ -publicat 2i.o 0n %s/issue-br1i................................ ef .7% s/conten-t2/.f3u % ll/how- 34 .7 ................................ 0 % 1(k)-plan-participant.s - 5 than at year-end 2016. Analyzing the group of consistent 401(k) participants at year-end 2020, the data show that 2.4 records for year-end 2016 through year-end 2020. These plan recordkeepers include mutual fund companies, Movement in the concentration of equities in 401(k) participants’ accounts results from changes in stock values and 2021). Between year-end 2016 and year-end 2020, stock markets generally appreciated more than bond markets (Figure 2). 40s 6.0% -3.1% 2.9% 2.0% -1.1% 4.9% use-loans-over-time-an-analysis-of-loan-activity-of-consistent-401(k)-plan-participants-2016-2020. percent, on net, moved away from a zero target date fund allocation—43.5 percent of this group had no investments in banks, insurance companies, and consulting firms. Although the EBRI/ICI 401(k) project has collected data from from reallocation activity by participants. Although information on specific trading activity of 401(k) participants is not Figure 3, Consistent 401(k) Participants' Investment in Equities and Target Date Funds .............................................. 6 9 All else equal, this w 50s ould have6 .t7en %ded to incr-ease 3.0% the propo3 rt .7 io %n of 401(k) 2.0 p %lan asset -1s .0 i% nvested 5. 7in % equities. However, See note 7. target date funds at year-end 2016 and 41 7.1 percent had no investments in target date funds at year-end 2020 (Figure Chang 1996e th sr o in ugh C o 20ns 20,is th te e u nt niver 40 se 1 o (fk) dat P a a pr rotvid icip ersant varis es ’ fA roll mo year cat ions to year t.o In E ad qd uitie ition, s th B e e plt an w s e ue sin ng 2 a 016 available in the EBRI/ICI 401(k) database, it is possible to observe activity away from or to 100 percent or zero equity 60s 8.6% -3.1% 5.5% 2.3% -0.8% 7.8% allocation to equities was essentially constant over the period (67.2 percent at year-end 2016 and 68.3 percent at year- Holden, Sarah, Daniel Schrass, and Elena Barone Chism. 2021. “Defined Contribution Plan Participants’ Activities, 2020.” F 10igure 4, Changes in Allocation to Equities Among Consistent 401(k) Participants ....................................................... 7 and 5). Th i2 s 0 net 2 0 ch ange reflects 9.4 percent moving from zero target date fund ownership to at least some, 7.0 percent particular provider can change over time. Records were encrypted to conceal the identity of employers and For the complete update from the year-end 2020 EBRI/ICI 401(k) database, see Holden, Bass, and Copeland 2022. holdings at year-enA dll. Among c 7o .1n %sistent 401(-k) 3.4 % participants 3 b .et 7%ween year 2- .0 en %d 2016 -an 1.4d % year-en 5.7d % 2020, few moved to, end 2020) (Figure 1). While it is not possible to directly observe the impact of each of these factors inside the EBRI/ICI ICI Research Report (February). Available at www.ici.org/pdf/20_rpt_recsurveyq4.pdf. 11 moving from some to zero, and 34.1 percent sticking with zero holdings in both 2016 and 2020. employees but were coded so that both could be tracked over multiple years. For each participant, data include At both year-end 2016 and year-end 2020, more than 90 percent of consistent 401(k) plan participants had at least or away from, these extremes of equity holdings. 11 Figure 5, Changes in Allocation to Target Date Funds Among Consistent 401(k) Participants ....................................... 9 40 T 1h (k) e Ed Bat RIab /IC aI s e, 40 i1 t (ik) s da pos tab sibase le t o en ovi brsoer nme ve n w t his etch eer rti fi pe ar d t tio ci p be anfu tsl ly en ctoer med pli an ort wi exitth ed th an e I S as Os -et 27 0 c0 las 2 In s en fortma irelty io o nver Sec tu hre it y per Auio dd it Note: Equities include equity funds, company stock, the e quity portion of target date funds, and the equity portion date of birth, from which an age group is assigned; date of hire, from which a tenure range is assigned; some exposure to equities, whether through equity funds, the equity portion of target date funds, the equity portion of Holden, Sarah, Daniel Schrass, and Elena Barone Chism. 2023. “Defined Contribution Plan Participants’ Activities, First of non–target date balanced funds. Funds include mutual funds, bank collective trusts, life insurance separate standard. Moreover, EBRI has obtained a legal opinion that the methodology used meets the privacy standards of the Gramm- analyzed. To gain insight into participant behavior, changes in allocation to equities overall—and to target date funds, Although consistent 401(k) participants moved, on net, toward target date fund ownership between year-end 2016 and Few consistent 401(k) participants had their entire 401(k) balances invested in equities, and slight net movement to n on– E otB u ar R ts g It Iss et an d d uat ie ng e B rlb io ef al an a an cco is b c r ual e ed ngi tan s, s f atc u n er e; d n ed a d nfsy u , i pn n o od o rts lh ec e dio n im U. n vte p h S san e .tm Pat p e yar n ts en pttro io ctc d i p an u k. ct an d T pt rih T ’m se r aa iri n s dem lh y ve iar ns ve e a tsm rto k een f dOffi ic nto thn p c es o e si.rs e IS tt cu fen ori S li tN t y o is : n 4 ; d0 0 ica an 8 18 ( te k) d 7 d – . as T 1 p h3 ar s e7 et co tX/ ic nv 9 isp al i0 san 0 tu en es 8 tts 8 s a 7 w at m –h t p 1ro l3 e ib 7h u X el t/ed 9 d0 at t$o l. east 5 th 0o +s. e 5 s o 0m e Quarter 2023.” ICI Research Report (July). Available at https://www.ici.org/system/files/2023-07/23-rpt- Leach-Bliley Act. At no time has any nonpublic personal information that is personally identifiable, such as a Social Security in particular—are examined. For the most part, there were relatively small changes in consistent 401(k) plan year-end 2020, this was concentrated among participants in their forties, fifties, and sixties. Participants in their is 3.7 million 401(k) plan participants with account balances at the end of each year from 2016 through 2020. 12 that full concentration occurred between year-end 2016 and year-end 2020. To be 100 percent invested in equities, the fund © s. 2An 02 ac 3, E com un pl t o bye alan e B ce e n fo erf ieac t Rh e sp ear ar tch icip I an ns t tiis t u th te e — su Em du o ca f t th io e np a ar ntd R icipe an se t’a s ra ch ss et Fu sn id. n al Al l lf u rn igh dst .s rPl es an er b ve ald. an ces equities in their 401(k) accounts changed little from year-end 2016 (92.9 percent) to year-end 2020 (94.3 percent) recsurveyq1.pdf. number, been transfer Ager ed gro t upo i so bra sh sed a r oed n thw e pit ah rt E icip B aR nI t's . age at year-end 2020. participants’ exposure to equities between year-end 2016 and year-end 2020. twenties and thirties remained similarly likely to own target date funds in both years. For example, 46.7 percent of 401(k) investor would have allocated their full 401(k) balance to equity funds and/or company stock. Analyzing the are constructed as the sum of all participant balances in the plan. (Figure 3). Increased equity exposure was found among participants of all ages, but those in their twenties showed the Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project consistent 401(k) participants in their sixties had held no target date funds at year-end 2016, compared with 43.2 group of consistent 401(k) participants at year-end 2020, the data show that 2.0 percent, on net, moved to a 100 e e e e e e e e e e eb b b b b b b b b b br r r r r r r r r r riiiiiiiiiii...........o o o o o o o o o o or r r r r r r r r r rg g g g g g g g g g g IIIIIIIIIIIs s s s s s s s s s ss s s s s s s s s s su u u u u u u u u u ue e e e e e e e e e e B B B B B B B B B B Bri ri ri ri ri ri ri ri ri ri riA e e e e e e e e e e efffffffffff re • • • • • • • • • • •s e O O O O O O O O O O Oa c c c c c c c c c c crc ttttttttttto o o o o o o o o o oh b b b b b b b b b b b e e e e e e e e e e e re r r r r r r r r r r r p 25 25 25 25 25 25 25 25 25 25 25 or,,,,,,,,,,,t 2 2 2 2 2 2 2 2 2 2 2 fr0 0 0 0 0 0 0 0 0 0 0 o2 2 2 2 2 2 2 2 2 2 2 m 3 3 3 3 3 3 3 3 3 3 3 t h • • • • • • • • • • • e N N N N N N N N N N N EBR o o o o o o o o o o o........... 5 5 5 5 5 5 5 5 5 5 59 9 9 9 9 9 9 9 9 9 9 I 4 4 4 4 4 4 4 4 4 4 4Ed ucation and R esearch Fund © 2023 Employee Benefit Research Institute 10 12 11 5 4 9 3 8 6 7 2