NEWS FROM THE EMPLOYEE BENEFIT RESEARCH INSTITUTE Note: A target date fund typically rebalances its portfolio to become less focused on growth and more focused on income as it approaches and passes the target date of the fund, which is usually included in the fund’s name. Funds include mutual funds, bank collecT tiar ve trg use ts,t D life ina sut ran ec Fun e separad te ac s Con counts, an tinu d any pe oo t leo Be d investme P nt opu produclar In t primarily in ve ves stetme d in then set cuAmo rity indican tedg . Source: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project Younger 401(k) Plan Participants The study also shows that more 401(k) plan participants held equities at year-end 2019 than before For immediate release: 5/3/22 the financial crisis of 2008. Data show that investment in equities is an especially popular choice for For more information: Ron Dresner younger plan participants. About two-thirds of participants in their twenties had more than 80 dresner@ebri.org percent of their 401(k) plan accounts invested in equities at year-end 2019, up from less than half of participants in their twenties at year-end 2007. Overall, almost 95 percent of 401(k) participants had (Washington, D.C.) -- Target date fund investing continues to be prevalent in 401(k) plans, particularly at least some investment in equities at year-end 2019. Equities include equity funds, the equity among younger 401(k) plan participants, according to an updated joint study released today by the portion of balanced funds (including target date funds), and company stock (the stock of the Investment Company Institute (ICI) and the Employee Benefit Research Institute (EBRI). The study, participant’s employer). “401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2019,” found that among participants in their twenties, 54.1 percent of their 401(k) assets were invested in target date funds “As 401(k) plan participants have increased their investment in target date funds, their overall share at year-end 2019, compared with 28.8 percent among participants in their sixties. At year-end 2019, of assets in in equities has grown,” said Craig Copeland, EBRI director of wealth benefits research. 31.3 percent of 401(k) assets in the database overall were invested in target date funds, up from 26.6 “Consequently, younger 401(k) plan participants will have more potential for asset growth with the percent at year-end 2018. higher emphases on equities in their plans.” Recently hired 401(k) plan participants were more likely to be invested in target date funds at year- Other findings in the study include: end 2019. Among those with two or fewer years of tenure, 65 percent held target date funds, compared with 57 percent of participants with more than 10 to 20 years of tenure, and 43 percent of • Average 401(k) account balances increase with participant age and tenure. For example, at year- participants with more than 30 years of tenure. Overall, 60 percent of 401(k) plan participants had end 2019, participants in their forties with more than two years and up to five years of tenure had an target date fund investments at year-end 2019. Target date funds are designed to offer a diversified average 401(k) balance of about $43,000, while participants in their sixties with more than 30 years portfolio that focuses on growth for younger participants and automatically rebalances to focus more of tenure had an average 401(k) account balance of more than $330,000. on fixed-income investments for workers as they approach and enter retirement. • 401(k) participants’ investment in company stock continued at historically low levels. Only 5 “Target date funds continue to be a popular and convenient investment choice for 401(k) plan percent of 401(k) plan assets were invested in company stock at year-end 2019. This share has fallen participants,” said Sarah Holden, ICI senior director of retirement and investor research. “Target date by 72 percent since 1999, when company stock accounted for 19 percent of assets. funds offer both portfolio diversification at every point in time and automatic rebalancing over time, helping investors of all ages manage their asset allocations as they save for retirement.” • A minority of 401(k) participants had loans outstanding. At the end of 2019, 18 percent of all 401(k) participants who were eligible for loans had loans outstanding against their 401(k) accounts, down Target Date Funds’ 401(k) Market Share slightly from year-end 2018. US Department of Labor data indicate that outstanding loan amounts Percentage of total 401(k) market, year-end were less than 2 percent of 401(k) plan assets in 2019 About the Study The study is based on the EBRI/ICI database of employer-sponsored 401(k) plans, compiled through a collaborative research project undertaken by the two organizations since 1996. The project is unique because it includes data provided by a wide variety of plan recordkeepers and, therefore, represents the activity of participants in 401(k) plans of varying sizes—from very large corporations to small businesses—with a variety of investment options. The 2019 EBRI/ICI database includes statistical information on 11.1 million 401(k) plan participants in 73,312 plans, which hold $0.9 trillion in assets, and covers 18 percent of the universe of active 401(k) participants. Full results of the annual EBRI/ICI 401(k) database update are posted on each organization’s website, at www.ebri.org and www.ici.org/research/investors/ebri_ici. # #