The average account balance of workers who participated consistently in a 401(k) plan from year-end 2007 to year-end 2012 increased at a compound average annual growth rate of 6.8 percent during that period, despite a 34.7 percent drop in that group’s average 401(k) account balance in 2008, according to a new study by the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI). The increase in account balances reflects several factors, including employer and worker contributions, investment returns, withdrawals, and loans.

The importance of analyzing a consistent group of participants. The annual EBRI/ICI 401(k) database update report is based on large cross sections of 401(k) plan participants with a wide range of tenure and participation experience. Consequently, meaningful analysis of the potential for 401(k) participants to accumulate retirement assets over an extended period must examine how a consistent group of participants’ 401(k) accounts change over time. About 34 percent, or 7.5 million, of the 401(k) participants with accounts at the end of 2007 in the EBRI/ICI 401(k) database are in the consistent sample.

Average and median balances of consistent 401(k) participants continue to increase. Overall, the average account balance of consistent 401(k) participants increased at a compound annual average growth rate of 6.8 percent from 2007 to 2012, to $107,053 at year-end 2012. The median 401(k) account balance increased at a compound annual average growth rate of 11.9 percent over the period, to $49,814 at year-end 2012.

Analysis of a consistent group of 401(k) participants highlights the impact of ongoing participation in 401(k) plans. At year-end 2012, the average account balance among consistent participants was 67 percent higher than the average account balance among all participants in the EBRI/ICI 401(k) database. The consistent group’s median balance was almost three times the median balance across all participants at year-end 2012.

Younger participants or those with smaller initial balances experienced higher percent growth in account balances compared with older participants or those with larger initial balances. Three primary factors impact account balances: contributions, investment returns, and withdrawal/loan activity. The percent change in average account balance of participants in their 20s was heavily influenced by the relative size of their contributions to their account balances and increased at a compound average growth rate of 41.8 percent per year between year-end 2007 and year-end 2012.

401(k) participants tend to concentrate their accounts in equity securities. The asset allocation of the 7.5 million 401(k) plan participants in the consistent group was broadly similar to the asset allocation of the 24.0 million participants in the entire year-end 2012 EBRI/ICI 401(k) database. On average, about three-fifths of 401(k) participants’ assets were invested in equities, either through equity funds, the equity portion of target-date funds, the equity portion of non–target-date balanced funds, or company stock. Younger 401(k) participants tend to have higher concentrations in equities than older 401(k) participants.

More consistent 401(k) plan participants held target-date funds at year-end 2012 than at year-end 2007, on net; a third of those with target-date funds held all of their 401(k) account in target-date funds. At year-end 2007, 27.6 percent of consistent 401(k) plan participants held at least some target-date fund assets in their 401(k) accounts. At year-end 2012, that share had risen to 32.1 percent as more 401(k) participants added some target-date fund assets to their 401(k) accounts than removed them entirely, around a substantial core that held them in both periods. At year-end 2012, 10.0 percent of consistent 401(k) plan participants, or nearly one-third of those holding any target-date fund assets, exclusively held target-date fund assets.

Figure 14 Figure 15 Among p to 201 References Morningstar Endnotes Age and Tenure of Consistent 401(k) Exposure to Equities Has Declined Slightly Amon arti 32. 2, cip 1 those an th perce e ts co in w Lifecycle nnsistent ith t th at efiv ir year e 60 yea Allocat gro s -en wh ru s dp, o of 201 ion h individu a ten d 2, In 10 ure de with 0 x. al had pe Chi the 40 rc a 1(k ent cago, gro low Participants )of w partici e th IL: r the aver occ Mor ir pac a an urr g ningstar. count e ts ing g Consistent 401(k) 40 experienced across 1(k inv ) ested bala all nce age in a wide equities ($ grou 53,5 ra ps 6 nge 5 at Participants Between 20 (Fi ) than year-en g of ure outcomes, those 13). d 20 In wi 12 both th often , compare more years, influenc than d you wi 07 and 30 eth n d ger by Jack VanDerhei is director of research at the Employee Benefit Research Institute (EBRI). Sarah Holden is senior What Does Consistent Participation in 401(k) Plans Younger 401(k) Participants Have Higher Concentrations in Target-Date Funds 16 Figure 11 Changes in Zero Allocation to Target-Date Funds Among responding to that question in took withdrawals; in addition, their survey w a minority of participants as 19 in 201 rebalanced 2. PLANSPON either SOR’s 2012 De their contribu fine tion d Contri investmen bution Survey t allocation of 5,930 plan s or their 401 2012 years the 13.4(k) re percent lationshi of pa te rticipants nur fe ully p ($2 amon inv 39, wer ested g 425 e t hmor e ). itn h eree e q like uiti factors ly es to at hold y m ee ar-e ntione some nd 20 d tar a07. g bet-d ov Althou e: ate contri fun gh bution dt h investments, e financi s, investment al crcompared isis that returns occurr with (Fied g our lder durin e 7pa ), grticipants: a tnhis d period 43. 7 director of Retirement and In vestor Research at the InveFigure stment 1 Company Institute (ICI). Luis Alonso is director of Aon Hewitt. 2013. 2013 Universe Benchmarks. Lincolnshire, IL: Aon Hewitt. At Figures year-end 2007, the consistent group was similar in age to the participants in the entire EBRI/ICI database. For Generate? Changes in 401(k) Account Balances, 2007–2012 Asset allocation dis Ctha ribnge ution s iof n Z 401 ero A (k) lpa loc rta ictiip on t ant ac o Ec qui oun tite b s al Aa m nc on e g to target-date funds 1 National Bureau of Economic Researc Consis h. te2 n010. t 401 U.S. (k) PB au rtsi ic ness ipanCycle ts BeE tw xpansions een 2007 a and n d Contractions. 2012 Cambridge, MA: account sponsors indicated that a medi investment allocations. an of 16 f See Consistent Holden und o and ptions were offere Sample W Schrass 20as Older Than 14 for DC plan d (an avera participants’ an ge All of Participants 17.6), wh nual activities between 2008 ile a median of four (an aver and age of may perce withdr have nawal t of inf con /lolu an s ence istent activity. d partici 401(k Pa) p rticipants ants’ partici allocati pants whoon i n wer their to ee you q 2 uit 0s n ies, ger ha d some or target- had offewer d this ate movement fyears unds in of the tema nur ir y 40 e have 1(k exper ) sim accou ienc ply ents d been the at largest year- norma en lpercent d 2012, For example, as of December 31, 2012, the EBRI/ICI 401(k) database included statistical information on 24.0 million 401(k) Information Technology and Research Databases at EBRI. Steven Bass is associate economist at ICI. This Issue Brief example, 36 percent of the participants in the consistent sample were in their 20s or 30s in 2007, compared with by age, Co pe nsric se te nt na t 401 ge of (k pa ) Pra tic rtiip can iptasn , y tse B ar e-ten wd 2 een 00 27 007 an d y anea d 2 r-012 end 2012 Figure 1, Consistent Sample Was Older Than All Participants in the EBRI/ICI 401(k) Database at Year-End 2012.......... 7 Percent age of17 consistent 401(k) participants, National Bureau of Economic Research. Available at www.nber.org/cycles/cyclesmain.html in the EBRI/ICI 401(k) Database Figure 7 at Year-End 2012 Ch Barclays anges in Capit Co al ns U.S. isten Atggre 401( gk) Particip ate Bond Ian nde ts’ Allo x. Sancatio Francis ns to co, Eq CA: uities Barclays Global Investors. By 2013. 4.7) were actually held by par Jack VanDerhei, EBRI; ticipants. Sarah Holden, ICI; Luis Alonso, EBR 6 I; and Steven Bass, ICI reallocation compare increases d in wit as ah v erage partic 28.4 perc ipants accoun ent at pproach of bala conce nsistent ed bet reti w401 een rement. (k) year pa-en rticipants d 2007 in antd heir year-en 60s. d Neverthe 2012. For less, example, the largest the movement average ac count toward plan was writt participan en wits, th in assistance 64,619 employer-spons from the Instit ored ute’s 401(k) research plans, and holding editor$1.536 ial staffs. trillion Any in vie assets ws ex(see pressed Holdin en this et al. report 2013b are ). 37 percent of the 21.8 million participa Pn ets rcen in tth age of e entire cons database istent 401 (Figur (k) pe art 1i) c.ipan Thirty ts, -three percent of the participants in July 2014 • No. 402 Pe rb ce y n age, tage y oear f A-end 2007 and y ccount Balance In ear ves -end 2012 ted in Target-Date Funds at Year-End 2007 Figure 3 Percentage of participants by age, year-end 2007 and year-end 2012 Domestic Stock and Bond Market Indexes Figure 4 target-date balance of 4 f0 u1 nd (k) use partici over p an thts e p in eriod their occur 20s rose red amo 472.5 ng pe cornsis cent tent (a 41. 401(k 8 percent ) partici compo pants iund n their ann 40s ual an avd erage 50s, gro and wwa th s rate) Using National Compensation Survey data and historical relationships and trends evident in the Form 5500 data, EBRI and ICI those At both of year- the a eu nthors, d 2007 and and should year-e not nd 20 be 12, ascribed the vast to the majority officers, of co trustees, nsistent or 40other 1(k) pla spo n n partic sors of ipants EBRI, had EBRI-E at least RF, so or me their by age, year-end 1 2 to 007 20 and y >2ea 0 to r-end 40 2012 >40 to 60 >60 to 80 >80 the consistent sample were in their 40s in 2007, while 30 percent of participants in the entire database were in their Figure 26 14 2, Consistent Sample Had Longer Tenure Than All Participants in the EBRI/ICI 401(k) Database at Year-End Plan Sponsor Council of America (formerly Profit Sharing/401k Council of America). 2007. 50th Annual Survey of Profit Distribution of 401(k) Accou Movedn Age A t wBala of a y Par ticnces by ipant Size of Account Balance Bloomber Lifestyle funds For discussion g Data. maintain a pre of New how York, U.S. households’ NY: determined risk level and ge Bloomber inve g Consi stments L.P. stent 401(k) chang Finerally gure e over 10 use the Parti life words cicycle, pants such see Sabelhaus, Bogdan, and Sc as “conservative,” “moderate,” hrass 2 or 008. Where the world turns for the facts Age group 1 Zero perce on U.S. employee benefits. nt percent percent percent percent lowest between among the en those d of 200 in their 7 an d 20s. the end of 2012 (Figures 5 and 6). Because younger participants’ account balances estimate exposur staffs. Neither ethe to n eu q EBRI mber uities,nor of wh active EB eth ReI-ERF r 401(k) throu lobbies g participants h equity or takes futo nds, be positi tab heou ons equit t 52 on y million portion specifi in c of 2012 policy targ a et n pro d -dat the poe s number als. funEBRI ds, th of invi e 40 e1(k) q tes uity comment plans portio to n be o on f about non– this Month-end level, December 2006 to December 2013 40s. Thirty-on 2012 .......................................................................................................................... e percent of the participants in the consistent sample were in their 50s or 60s, comp .............................. ared with 32 percent 7 Zero in from Zero by Remained Moved to Net Zero in Sharing and 401(k) Plans: R Ze ero flecti in ng Mov 2006 ed APlan w ay fExperien rom Remce ain. eChic d ago, MoveI dL t: o Plan Spo Net nsor Council of America. Younger 4Percentage 01(k) Pa Accumul rticip 20 a o sn fate Si participants with a ts30 H savgni e 40 sHig fi50 cant h ser 60 CBal o s ncances e ccount ntrations in Equities “aggressive” 20s in their name to indicate the fund’s risk level. 57.8 Lifestyle fund 4.1 s g 3.5enerally are inc 3.1 luded in the no 2.6 n–target- 28.9date Introduction 180 tende d to be small (Figure 5), their contributions produced significant percent growth in their account balances. In 515,000 (see note 2 in Holden et al. 2013b; and U.S. Department of Labor 2013). At year-end 2012, 401(k) plan assets were research. 15 target-date balanced Ag funds, e or company 2007 stock. At 2012 year-end 20 at 07, zer89. o 1 Z er perc o by ent 2012 of co Change nsistent 4 2012 01(k) participants held at of participants in the E Ag BRI/I e CI data 2007 base ov Zerall ero by (Figur 2012e 1). at Zero Zero by 2012 Change Zero in 2012 Deloitte Consulting LLP, International Foundation of Employee Benefit Plans, and the International Society of Certified Although 30ssome movement Asset al to loc or a away tion di from stribhigh co 6u 6t.i4 on of ncentra 401(k 7. t)io p 2ns in equities may be d articipant 4 a .7ccount bal 3. u a2 e ncto e t active o equirealloc 2 ti.3 es ation by 16.participants, 2 balances in specified ranges, year-end 2012 balanced fu Average nd category. 6% About the EBRI/ICI 401(k) Database Figure 13 The EBRI/ICI 401(k) database, which is constructed 8% from the administrative records of 401(k) plans, represents a large Retirement and health benefits are at the heart of workers’, employers’, and our nation’s contrast, the average 20s account balance 57.o 8f older partici -9.1pants, or 4 those 8.7 with lon 7.6ger tenur -1.5 es—both 56.3 11% of which tended to have $3.5 trillion (se Figure least some 3, 40s Distribution equities e Investment C in of their 401(k) 401 ompany Institu (k) Account accou Balances nts; t7 e 2014). The 2that .6 by share Size edged 2012 7. of 6 Account EBRI/ICI down Balance 4 sl .4 ightly database to .................................................. 8cover 72. .4 7 perce ed 46 nt percent at1 yea .8 r-en of the d 201 universe 10.8 2 (Fi .......... g of ure 8 20s 15.5 -5.5 10.0 2.5 -3.0 12.5 Plan Sponsor Council of America. 2013. 56th Annual Survey of Profit Sharin 14% g and 401(k) Plans: Reflecting 2012 Plan by age, percentage of participantsB,a y rcea laysr C -en apitd 2 al U.S 007 . and year-end 2012 it also may be due to passive 160 Employee Benefit Specialists. changes, such 2013. Annua as the relative l 401(k) Benc prices hmof arking equities Surve and y: fixed-income 2012 Edition securities . New York, or the NY: realloca Deloitt tion e of 1 4 What Does Consistent Participation in 401(k) Plans The economic security EBRI 50s /ICI Participant-Dir . Fo ected unded in 1978, EBRI is Ch Retir ang em es i ent 7n 4.P 401( 4lan Data k) P Collect 7. ar 4 At ggregate ithe most authoritative and objective source of ciion pan BProj ond ts' 4Index .2 ect Allis ocat the ila o 2. rgest, n 7 to most repr 1.7 esentative 9.7repository cross section, or snap 30s shot, of 401(k) 6pl 6.4 ans at the -end 9.9 of each year. 56.5 The EBRI 6.5 /ICI 40 -3 1(k .4 ) databa 63.0se is a cross section of larger balances at the30s beginning 1of 0.6 the study period -3.8 than younger 6.8 workers 3.3 or those -0. w 5 ith shorter 10.1 tenures—showed more 401(k) The Cop y tenur right Inf plan e pa corticipants, mposition ormation: mor of t e h This e than consistent re10 port percent is copyright sample of plans, ale so d a by wnas d the 44 similar Em percent ploye to tof h ee Be 401(k) tenef nure it plan R com ese assets. p arch osition Institut of 4e 01(EBRI (k) partici ) and pan byts the in 9). 27 The downward movement 2 was concentrated among participants in their 50s and 60s, while the fraction holding Experience. Chicago, IL: Plan Sponsor Council of America. 1 Consulting LLP. Available at www.deloitte.com/assets/Dcom- $107,053 target-date GICs are insur funds ance company towards S&P 500 fixed-income products that guarantee securP ities erceover ntagtime. ea spe of Acc co ific un rate t Balof anret ce In urn veon stethe d ininve Equsted ities a capital t Year-over End 2 the 007life of the 60s EBRI/ICI 401(k) Database 7524% .6 6.7 3.9 2.6 1.6 9.6 25% 39.6% 40s 72.6 7 -10.5 62.1 5.6 -4.9 67.7 Figure information on these critical, complex issues. 4, Consistent 440s 01(k) Particip 9.2ants Accumulate -3.1 Significant 6.1 Balances 4 ................................................................... .1 1.0 10.2 9 of the in 140 entire formation population about in ofdividual 401(k) 4 pla 0T 1n(a k) partici rg pla etn -p D part ants, at 3e Funds B icipa and nt ita rccounts. epres etw ents een 2007 and 2012 As a of wi Dec de ra ember nge of 3 1p,articipants—in 2012, the EBRI/ICI cludin g 40 th 1(k ose ) who the modest Generate? Changes i yearperce -end 200 nt gro 7 EB wth RI/ICI in account 401(k)siz data e (Fi bn a gse. 401(k) ure For 6). For exam exple, ample, Account Balances, 2007–2012 32 percen the average t of th e accoun consistent t balasampl nce ofe 4 h 01(k ad five ) partici or fe pw an er ts in Investment equities rema Co in mpany ed stable Institut among e (Ithose CI). It in may their be30s usea dn with d 40s out (hov permission ering right but aro citatio und 90 n of perc theent source in bo is th requ years), ired. an d edged 1 Russell 2000 All Consistent Samp 2le 72.4 1 to 7. 20 2 >20 to 4.2 40 >40 t2. o 8 60 >60 to 1 .8 80 >80 11.7 contract. UnitedStat es/Local%20Assets/Documents/Consulting/us_cons_hc_401ksbecnchmarkingsurvey2 27% 012.pdf 2 Consistent Sam 50s ple 74.4 -10.9 63.5 5.8 -5.1 69.3 50s 9.9 -2.9 7.0 5.5 2.6 12.5 16 database Because incl of these uded changes statistical in information the cross secti about ons, 2 comparin 4.0 millio g average accou n 401(k) plan n partici t balances acr pants, ino ss different ye 64,619 employer-sponsore ar-end cross- d are young and individuals who are P 2er ne cent w to age o their fjobs, consi as stwell ent 401( as older k) pl participants an partici pa and ntthose s who have been with their their PLANSPO 60s N incre SOR. ased 2012. 12.6 20 per 12 cD ent efin (a ed2.4 Con pe tri rcent bution com Sup rve ouy nd (November). annual average Available growth at rate) bet $95,798 ween year-end 2007 and years of tenure in 2007, compared with 38 percent of participants in the entire EBRI/ICI 401(k) database (Figure 2). up Ta h e bit Nation 200 amon 7 E al A B g ge R Bu partici I/IG C reau rI oup 401 p of (ants k) Econ data in bas omic theeir Research 20s (fro 7 m (NBER) 4Z .9 84. ero5 , percent wh pe ich rc 6. en pu 3at tblishes year-end peits rc4en .0 as t2007 sessment to per87.5 c2. en of 5tU.S. percent business perchol ent 1.6din cyc g pe les, equiti rcen indicated 1t0 e.s 9 at ye th ar- at 33% 120 By Jack VanDerhei, 60s 60s EBRI; 1Sa 2.6rah Holden, ICI; Luis Alonso 75.6 -2.8-10.0 9.865.6 $92,186 , 8.1EBRI; 6.0 and 5.3 -4.0Steven 17 7.9 1.6Bass, ICI Figure 5, 401(k) Account Balances Among Consistent 401(k) Participants from 2007 Through 2012 .......................... 10 EBRI focuses solely on employee benefits research — no lobbying or advocacy. sectional Recommended C snapshots itation: can lead tJack o false Van conclusions. 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In addition, participants 1 in to their 20 60s >2 tend 0 to 4to 0 have >40 a thigher o 60 propensity >60 to 80 to make >80 participants in the entire EBRI/ICI 401(k) database. 2010. advice guarantee (typi Around empha Faci scizing ally by an ins litating de Soucreasi rcLifetim e: Tabu u ng larance company tie oni sn Plan frvestment om thPartici e EBRI/IC risk p I or a bank) to pr Pat artiion.” cas ipant- in DStatem divi irecteduals d Retent iovide remapproach enof t Plbenefit athe n DataInvestment C oretirement. llpayments ection Project.Compa according to ny Institute: the plan Sarah at book Holval den, ue. cals postage rate paid i Son u rW ce:a Tsh abu in lagto tions n, D from C th ,e and EBR a I/IC ddi I Pa tio rtinal m cipant-D ail iring Co ectensisten o d R ffi ece tires m t Sa .e P nt O P mp lS anT lD eMAS ata CoT lle ER ctio: S n Pend rojectad . dress changes to: EBRI Issue Brief, 1100 Figure 6, Changes in 33% 401(k) Account Balances 30% Among CoPnsis ercent tent age 401(k of ) Participants from 2007 Through 2012 ......... 11 organization. It analyzes and reports research data without spin or underlying agenda. All findings, $78,829 Note: A target-date fund, whether a 9mAT A GLAN utual fund, bank collective trust, life insuranCE ce separate account, or other pooled Russell 20 Ag00 e $77,049 gr In oup 40s dex. Tacoma, Note: EquitiesW incA lu: de F er qan uity k funRu ds, co sse Zm er p9. o all n2 y C sto ocmp k, anany. dpe th 2 e r .8 c e qe unt ity portion o per 4 f b .0 a c lan ent ced funds. Par pe 7. tic 8 ric pa e nnt ts include th24. e pe 7.56 r m cill ent ion 51.pe 6 rcent balance and 13t ICI h S would Re t. N se W ar ,tend S ch uit Pe e 8 to rspectiv 78, be Wpulled ashie, ng tVol. o down n, D 2 C0 ,if 200 , a no. 05 large -4 4 05 (July number 1. Co 2 py014 right of ). 20 participants 14 by Emploretire yee Beand nefit R roll eseover arch Itheir nstitute. A account ll 28% rights r balances. eserved. No. 402. EBRI/ICI fewer years proje of ct tenur is un e iqu at thei e because r current of jobs, its in clusion while 5 ope f da rcent ta pr ha ovi d dmore ed byt h a an wide 30 vari years ety of of ten plan ure recor (Figure dkeepers, 2). permitting Account Balance withdrawals, as they approach retirement. Senior Director, Retirement and Investor Research and Elena Barone Chism, Associate Counsel, Pension Regulation whetheir nve on fi stmennan t prodcial uct, typdata, ically reboption alances itss p, oror tre tfolio to nds, become are reve less focused oaling n growthan and d moreli re focu able sed on— the re income as it ason EBRI information is 401(k) plan participants with account balances at the end of each year from 2007 through 2012. Funds include mutual funds, 80 20s 56.3 5.4 3.9 3.2 3.4 27.8 50s 9.9 Inv 4es .2ted in Target 5.5- 14.6 25.8 40.0 29 17 As expected, the consistent participants who were followed over the five-year period tended to be older and to have the analysis of the activity ap bp an ro k ac coh les lo ec f ta in vpartic d e tp ra us st ss e,s ipants l itfh ee ins taur rganc e ti n d e a s tep 401(k) e o ar fa tth ee ac fu cn opl d u,nt w a shi ,n a cs nd h is of an us y ua varyi po llo y lie n d c ln iu nd vg ed estsizes—from m in en th te pfru ond du 's c tn p ar m im e.avery rP ila yr itnv icies plarge an ted ts in inc th lu e corporat dse ec th ur e it7. y 5 ions to small Ho Some useho recordkeepers ld survey info supplyi rmationg n indicates that data were un ho able useho to provide lds an Fig ticipa u comp re te 9lete rebalancing asset allocati their on portfolios detail onas they age. See Sabelhaus, certain pooled asset classes Figure 7, Dom the estic gold sta Stock n adard nd Bofo nd r priva Marktet e analysts a Indexes .............................................................................. nd decision makers, government policymakers, the media, and ................. 13 (June 17). Available at www.dol.gov/ebsa/pdf/ACHolden061714.pdf 30s 63.0 7. Dat 9e Funds 5.0 31% 3.6 3.0 17.4 3 Sabelhaus, John, 60s Mich m iin lael ldi ioc n a 401 t eB d.(o Age k)gdan, pl a gr n ou pap rt iisan c ib pa asd n e td sD on wia t th hniel a ec pa cou rt 12. inSchrass. ctip ba a 6 n la t'n sc a e g se a a t tt h y200 e e6 a er. n -3 d en8. of d 20 eaEquity c 12. h year fr1 om 0. a n 20 0d 07Bond through 2Ow 01 18. 2. n A 6ge ership group is in bas20. eAm d on 0 erica, 2 32. 008 6 . The impo $65,454 rtance of analyzing a consistent group of participants. The annual EBRI/ICI 401(k) database update report Report availability: About half of traditional This IRA reassets port isresulted available from on rollover the Ints ernet from at employer- www.ebsri pon .org sored and reti at rww ement w.ici.or plans. g See Holden and Although annual updates of the EBRI/ICI 401(k) database provide an invaluable perspective of 401(k) account These percent changes in 401(k) participant account balances also reflect changes in asset values during $63,929 the five-year longer tenure by year-end 2012, compared with the broader base of 401(k) participants in the EBRI/ICI 401(k) b Bogdan, and Schrass 2008. for usinesses—with one 60 or more of a their variety clients. of investment The final EB o RI/ICI ptions. 401(k) database includes only plans for which at least 90 percent of all plan 40s the public. 67.7 8.7 5.1 3.4 2.6 12.5 Changes the pi an rti 401( cipant's agk) e a P t year ar -end ti ci 201p 2.ants' Allocation to Equities Between 2007 and 2012 1 17.5% $60,329 All Consistent Sample 10.9 310 .80% 5.4 11.3 22.7 46.0 Washington, DC: Investment Company Institute (December). Available at $58,991 Chism is based on lar 2014. ge cross sections of 401(k) plan participants $58,351 with a wide range of tenure and participation experience. 16.2% balances, asset allocation, and loan activity across wide cross sections of participants, the cross-sectional analysis is not 50s The Emplo 6y 9ee .3 Benefit Research Institut 8.6 4.9e (EBRI) was founded in 1978. Its 3.3 2.4 m1 ission is to 1.5 database. Figure period. 8, Altho Aver Part uage gh icipants asset Asset in alloc Atllo he ation cation consistent varied of 401(k) sa with mple, Accounts a 25% ge, by an de d fin by miation Participant ny part , had icipa a mi A ng ts nimum e held ...................................................... a terange nure of of five investme years nin ts, 2stock 012 15.5 (the % market .......... length14 Holden, Sarah, and Daniel Schrass. 2013. “The Role of IRAs in U.S. Households’ Saving for Retirement, 2013.” ICI assets could Per be cidentified. entage 25% of consistent 401(k) plan participants by age, year-end 2007 and year-end 2012 2 23% This paper is 20 an 07 uE pdat BRI/Ie C I to 401( IC k)I D an ata d bas EBRI e ’s ongoin 13.2g resea3 rch .8 into 401 5( .3 k) plan parti 11. c2 ipants’ activity. 23.0 The 43. prev 4 ious update 18 40 60s 71.6 >8 7.6 0% to <100%4.3 3.1 2.1 11.4 Very ww few w.ici.org/pdf/rpt_ consistent 401(k) 08participants _equity_own contribute to ha ers.pdf d th, to encourag eir entire 401 e, an (k) d to enhanc balances investe e the developmen d in equitiet of sound empl s, and only a small oyee ben net efit Consequently, meaningful analysis of the potential for 401(k) participants to accumulate retirement assets over an extended 12.8% $50,316 well See Sa suitebelhaus d to examini , Bogdan, and Schrass 200 ng the impact of par 8. ticipation in 401(k) plans over time. Cross sections change in composition Sources a performance n d ha Types of D d an impact ata on these balances because, in large part, 401(k) plan participants’ balances tended to be of time for the longitudinal analysis), with 10 percent having five years of tenure, 29 percent having between five and Research EBRI explo Persr pective es the breadth of emplo 19, no. 11 (November). yee ben Available efits and related issues. at www.ici.org/pdf/per19-11.p df 1 4 was “40 Who we are 1(k) Plan Asset Alloc 11.4%ation, Account Balances, and Loan Activity in 2012,” published in December 2013. This All Consistent Sample 67.9 8.2 4.8 3.3 2.5 13.2 programs and so Percen und public policy tage of Account through objective Balance Investedresear in Eqch and uities educati at Yearon. EBR -End 201 I is the only 2 Account balances are net o $45,519 f unpaid loan balances. 19% movement away from that full concentration occurred be> twee 0% ton 80% year-end 2007 and year-end 2012. To be 100 percent period must examine how a consistent group of participants’ Figure 9, Changes in 401(k) Participants' Allocation to Equities Figure 401(k) 16 Between accounts 2007 change and ove 2012 r time. ........................................ About 9.5% 34 percent, or 7.5 ... 15 from year to year because the selection of data providers and sample of plans using a given provider vary, and because 10 weiy ge hte ars, d to 36 wEBRI percent ard eq studie uit havin ies. sA g the worl ltogeth between 8.7% 3 er, d of health and retirement ben 10 at year-e and 20 nd years, 2012, a n wh d ether 26 pe rcent looki efitn s having g — issue at the more cons s such a th istent an 20 sgro 40 ye u 1(k)s, ars p or (Figure the IRAs, retire entir 2). e In EB ment RI/ICI 20 2012 EBRI/ICI 401(k) database 59.0 5.3 3.6 3.0 2.4 8.5%26.7 private, nonprofit, nonpartisan, Washington, DC-based organization committed exclusively to Several 19 EBRI and ICI members provided records on active participants in 401(k) plans for which they kept records at paper provides longitudinal 7.9% data not included 12% in that ea 1 rlier to 20r eport. >2 0 to 40 >40 to 60 >60 to 12% 80 >80 S&P 500. New York, NY: 11% Standard & Poor's. 26.9% Because no target-date funds have a 100 90.8 pe %rcent equity allocation, investors with a 100 percent allocation to target-date invested in equities, the 401(k) investor would have allocated their full 401(k) balance to equity funds and/or company million, of the 401(k) particip Chants ange with 89 s .9% inaccounts at the e 100 Perc89 en .8% t Aln l90 o d of 2007 in the ca .1%tion to Targ EBRI/ICI 401(k et-Date Fund)s database are Among in the consistent Holden, Sarah incom , and eDa ade niel q 89 uacy, S .4chrass. % consu 2014. mer-drive “Definen d b Cont enefits, ribution Socia Plal nSecurity, Participants’ tax treatment of both retireme Activities, 2013.” ICI Research nt and health Report 401(k) pa Sour rticipants ce: Tabulations join from or the Ele BR ave I/ICI Ppl arans. ticipant- DIn irec additio ted Ret5.7% irem n ent , th Plan e Da atn aalysis Collectiocovers n Project. account balances 89.1% held in 401(k) plans at 5 401(k) database, 22 equities—equity fun public ds, poli the ce y r quity esearch portio and n edu of target-dat cation on 3%e econ funds, omic s thecuri e eqtuity y and em portion plo yoee f b non enefi –target-date t issues. contrast, in the entire EBRI/ICI 401(k) database in 2012, 37 percent of participants had five or fewer years of tenure, 87.5% 5.5% 4.8% 87.5% 87.4% Age Group Zero percent percent percent 87 per .4% cent percent year-en The value 19d 20of 12t.his These percentage plan r is ecordkeepers lower than it would have be include mutual en if it merely refl fund companies, ected banks, employee insurance turnover compa annies, d retirement. and Any 1 4.2% 4.0% Figure 10, Younger 401(k) Participants Have Higher Concentrations in Equities 3.5% ........................................................ 16 0 Participants include the 7.5 million 401(k) plan participants with account balances at the end of each year from 2007 through 2 012. stock. funds would no Analy 84.5% Co zt be counted a ins n 10g isten th t e Sagrou mple in p s having 200 of C 7consistent ons EiBRI 100 p ste /ICI nt 4 ercent equities. 401 401 01(k) (k) ( Data k) P bas pa a 3.4% e rticipants rt in ic 200 ip 7ants at C B o ns year eitw stene -e t Sa end n mp 2007 a le 20 in 12, 20123.1% tn he d 2012 data EBRI/ICI sho 401( w k) tha Datat bas 1.8 e in p 201 ercent, 2 on benefits, cost management, worker and employer attitudes, policy reform proposals, and pension assets sample. 43.7% EBRI’s membership includes a 2.7cross-section of % pension funds; businesses; trade associations 2.7% ; partici (April pants’ ). Ava current ilableemploy at www.ici ers. .Retir org/pdf eme /p nt pr_ savings 13_rec_survey held in plans .pdf at previous employers or rolled over into individual 24 balanc perc ed ent 2 fuha nds, 2 d 42.2% 0s betw and een compa five n an y d stock—repr 10 years, esented 24 12. perc 5 ent about had 2.7 three-fifths between 3.10 0ofa 401(k nd82 2 .0 1% ) yea 6. plan 2 rs ,participants’ and 15 17. p 8ercas ent sets h 57. ad 8 (Fi mor gure e than 8, 20 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 U.S. Departm The yeare -ent nd 2007 of Labor, EBRI/ICI 40 Employee 1(k) database repr Be esn ene tsfits 21.8 m S ile lion curity 401(k) pa Administration rticipants. 2.3% . 2013. Private 1.9% Pension Plan Bulletin, Abstract of 1.7% time consulting a 401(k) firm plan s. Although sponsor changes the EBRI/ICI service 401(k providers, ) project all participants has collectein d d the ata f plan rom would 1996 be thexcluded rough 20fr 12 om , th the e uconsistent niverse of data 14.1 16.9 15.0 14.9 and funding. 15 There is wi .0 labor un Pde erc spread ions; h entage ealth of recog c car ons e prov nition istent 3, iders and insur that if employee be 4 401(k) part ers; icigovernment org pantsn,efits data exist, EBRI kno anizations; and service firms. ws it. 12.1 15.2 net, moved 3 a11 way from a 100 percent equities allocation—15.2 12percent .6 of this group at year-end 2007 and 13.4 percent 13.4 13.4 The year-end 2012 EBRI/ICI 401(k) database repr37 ese.n0 ts% 24.0 million 401(k) participants. retirement acc 3o 0s unts (IRAs) are not included in 10. th 1e analy3 s.is. 5 To ex 4plor .1 e the full 8.0 impact of o 19. ngoi 6 ng partici 54.8 pation in lower panel). However, the asset allocation of participants in the consistent sample varied with participant age, a years Table of Contents 20 (Figure 2). 2011 Form 12.7Source: 5500 Tabulations Annual from Re the ports EBRI/IC (V I Participant-D ersion irect 1.0). ed R etirement Washin Plan gton, Data Collection DC: U.S. Project.Department of Labor, Employee Benefits sample. Figure providers 11, vari Cha es nges from in yZero ear t o A llocation year. 33.6%In to ad dition, Equities thAmong e plans Co using nsistent a parti 401(k cular ) Part provider icipan can ts Between change ov 2007 er time. and 2012 Recor ...... ds 17 Plan Sponsor Council of America 2013 reports that among 401(k) plans surveyed with automatic enrollment, 73.3 percent Note: A target-date fund, whether a mutual fund, bank collective trust, life insurance separate account, or other pool 11e.d 7 investment product, typically rebalances its Averag e and <$10, med 000 ian bal $10,000 toances of >$20,000 to consi >$30, 000 by s to tent age, >$40, 401(k y 000 ear to -end 2007 and y >$50, )32 p 000 a .3rt % toic >$60, ipants cont 000 toear >$70, -end 2012 000 inue t to >$80, o000 intcrease. o >$90,000 Overall, the average to >$100,000 to >$200,000 account Holden, Sarah, and Jack VanDerhei. 2001. “The Impact of Employer-Selected Investment Options on 401(k) 32.1%Plan at year-end 2012 Note: were The EBR100 I/ICI 401(k) percent database inv contains este 21.8 d in million equ 401(k) ities plan (Fi participants gure 1 at 2 year-end ). This 2007 net and chan 24.0 million ge at refl year-end ects 2012. 6.2 The percent consistent moving away 40s 10.2 4.6 5.2 30.7% 9.5 26.4 44.2 401(k) plans, and to understand how typical 401(k) plan participants have fared over an extended period, it is 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 pattern that also is ob $20, served 21. 0006 $30, in 0the 00 cross- $40,000sectional $50,000 EBRI/ICI $60,000 40 $70, 1( 000 k) dat $80, abas 000 e. Yo $90,ung 000 er $100, part 000 icipants $200,000 generally tended to 28.4% Security Ad sample ministration consists of 7.5 (Jun million e). 401(k) Avai plan participants lable at w ith ww accw.do ount balances l.govat /ebsa the end /pdf of each /2 year 01from 1pe 2007 nsionpla through 2012. nbulletin. Pa rticipant pdf age is age as of 27.4% 27.6% were encrypted to conceal the ident EBRI’s work advances knowledge and unders ity of employers and employees, but were tanding of emplo coded so that botyee benefits and their h could be tracked over Introductio use target-date funds EBRI delive n.................................................................................................................. rs a stead as the default investme y stream of invaluable research and anal 13.3 nt in 2012, compared with 30.6 percent in ysis. 2006 (see ........................................ Plan Sponsor Council of 4  balance of consistent 401(k) participants increased at a co nA am nnua e. Agel P grou erp cie snt ba C sed ha on nge the pa in rtiT cot ipaa nl t'R s a e ge 100 tur atn yeInde ar-end x201 Mo 2. v R eow d A pew rce a mp ny ta ge ound annua s m R aem y n 25.6% ot ai a ned dd to 1l average growth rate of 6.8 p 00 Mo pe vre cd en tt be o c1 a0 us0 e of round ing. 100 ercent from 2007 to Participan5ts’ 26. 0s the A 3 year-end sset indicated. Allocation Components s: Prelimi may notn add ary to 12. 100 Fin 5 percent dings.” because 7 .Wo 1 of rking rounding. paper 7.7 prepare 17. d 8for the Cente 25.4r for P29. ension 5 and from the 100 percent allocation to something less, 4.4 percent moving to a 100 24 perc .4%ent allocation, and 9.0 percent By 6 year-end 2012, the consistent sample of 401(k) participants also was older, on average, compared with the 24.0 9.3 important 50 to analyze a group of participants who have Size of be Ac en count part Balanc of t ehe database for an extended period10. . T 0his favor Figure e12, quity Cha funds n 23ges an ind 10 tar 0 gP et e-date rcent 14.1 fAllocati unds, w on hile to o Equities lder parti Among cipants 16.9Co were nsistent more 8.6 40like 1(k) ly Pa to rticipants invest in fi Bet xew d-income een 200 7 securi ties For the report on the year-end 2007 EBRI/ICI 401(k) database, see Holden et al. 2008. importance to the nation’s economy among policymakers, the news media, and the public. It multiple years . EBRI publications include in-depth coverage of key issues and trends; summaries of research America 2007). Percent in from 100 Percent at 100 19.2 Perce11 nt .8by Net 8.8Percent in 60s 2 17.9 9.7 12.6 20.5 15.8 23.5 2012, to $107,053 at year-end 2012. The median 401(k) account balance increased at a compound annual average growth Retirement S&P R 5e 00search (CPRR) Current Pensio 9. n 1Policy Issues Conference, Miami University, Oxford, 9.Pe 9 rce n Ota Hg e(Ju  of  ne 8–9). sticking with 100 percent allocation to equities in both 25 2007 .1 and 2012. In other words, nearly 60 percent of consistent EBRI/ICI Database Longitudinal Analysis 4........................................................................................ 1 3.2 8.0 .......................... 4  million participants in the entire EBRI/ICI 401(k) database. For example, only 3 percent of24. the 9 participants in the consistent group of participants (a does this b longitudinal y co sample nducting ) is and p drawublishing policy re n from th2. e 9annual sear 7. cro 9 ch, analysis, ss sections. and special reports on 3.2 The Vanguard Group. 2014. How America Saves 2014: A Report on Vanguard 2013 Defined Contribution Plan Data. such as bond and 20 funds, 12 ............................................................................................................................... money funds, 2.1 or guarantee29. d 2investment contracts (GICs) and other stable value fund ................. s. 17 What we do Source: Tabulations 6. fr2 om the E 1BRI/ICI Participant-Directed Retirement Plan Data Collection Project. finding Ages and policy 2007 developments; by 2012 timely factsheet Percent s on 201 hot topics; 2 Change regula 2.6 2012 r updates on legislative and 1.7 30.8 All Consistent Sample 12.6 6.1 1.7 7.0 13.3 22.7 1. A8ccount 38.  Bal 3ance  3 38.8% 7 1 rate of 11.9 percent over the period, to $49,814 at year-end 2012. 1.7 40 The year-end 2012 EBRI/ICI 401(k) emplo databas y34 ee benef e repres .7 ents its issues; holding educational br 24.0 million 401(k) plan participants. iefings for EBRI members, congressional and 401(k) participants with their 401(k) accounts fully invested in equities at year-end 2007 were fully invested in equities consistent Tenure refers gro Ru up to years at the 2. sse 6wer ll 200e 0 in their current employer and is gener 20s 40an .7 d 19 percent were in ath lly eir derived 30s atfrom year-en date d of 2012 hire (Figure reported 1). for In the the participant. entire EBRI/ICI Tenure 21 Valley Forge, PA: The Vanguard Group, Vanguard Center for Retirement Research. Available at regul 20s atory development 263.3 s; comp -re 8.1hensive refere 18.2 nce resou 3.4 rces o-n 4.7 benefit pro 21.6 Inve grams sted in Ean quitd iewo s rkforce Data Data S provide ecurity 2 d ................................................................................................................. for each participant include date of birth, from which an age group is assigned; ....................................... date of hire, from which4   At year-end 2012, 72 percent of plans in the EBRI/ICI 401(k) database offered target-date funds in their investment Partici 2012 pants EB 45 incl R.I7 /ude ICI 40 the 43 1( 7.5 .k 4) mil D at lioa n bas 401(k) e plan parti10. cipants 2 with accoun 4.1 t balances at5 the .9 end of each y 13. ear 0 from 2007 throug 25.h 720 12. 41.0 Holden, Sarah, and Jack VanDerhei. 2002. “Can 401(k) Accumulations Generate Significant Income for Future 2007 2008 federal agency st2009 aff, and the news media; 2010 and sponsoring public opinion survey 2011 s on emplo 2012 yee 19.5 19.8 32.4% 19.2 18.8 at year-end 2012. 17.4 The Figure Among dec 13, consist line NCha ote in : Acc e n stock nt ges ount 40 in bala market 1(401(k k) nces par are values )t partic icipants Participants' ipan that t acc bet ount oc w curred Allocati b een alancy 16 ese .in har-end 5 on eld 2ito 008 n 401(k Target-Date 200 (Fig ) plans 7 ure a at nthe d 7)year partic als Funds o i-en pan ten ts' d Be cu d2012, ed rtween rent to emp few pull l2007 oyers moved 401 17 and .a 1(k) n are d net 2012 to acc ward, of opunt l......................... an loans or balanc away . es from, lower, 18 401 will (k) not dat reflec aba t the se at years year 30s 15. of -e 9nd participati 2012, o 12 1 n 4 in .p 1erc the ent 401(k) of participants -3.6 plan if the 401(k) wer 116. 0.5 e 0 in plan their was 220s .8 added and 2 b -0 3 y.8 the percent employer 13.3 w 16 e.r0e at ina the later ir 3date 0s. Thirty- or if Barclaissue ys Capita sl ; U.S. and major surveys of public attitudes. 14.8 https://institut 47.5 ional.vanguar EBRI/ICI Database Longitudinal Analysis d.com/iam/pdf/HAS14.pdf a tenure range So13. uris ce: 3 assigned; Tabulations fro m outstandin the EBRI/ICI Par g ticlo ipant an -Dba ireclance; ted Retirem fent und Plan s Din at a the Collec par tion P ticipant roject. ’s investment portfolios; and asset values lineups, 41 percent of 401(k) 4participants were holding target-date funds, and 15 percent of the assets in the database were benefit issues. EBRI’s Education and Research Fund (EBRI-ERF) performs the charitable, Analysis of a consistent group of 401(k) participants highlights the impact of ongoing partici10 p0at % ion in 401(k) Retirees? 30 Retirement ” Invsav estment ings held in Com plansp at any prevInstitute ious employers Pe or rspective rolled over into 8,IRA no. s are 3, not and incl ud EBRI ed. Issue Brief, no. 251 (November). Available Sample of Con Aggres gate istent Bond 40 Index 1(k) Participants, 27.2% 2007–2012 ........................................................................................... 12, 13 4  1 26.9% 40s 9.126.5% -2.2 6.9 2.4 0.2 9.3 these extreme P s ar tof icipae nEBRI tq s uity includ ehol the 7dmeetings .5 ings; millio npresent an 4 0in 1(k )addit plan pai ron, ticip d anexplore i ther ts withe acwas couns t b sues only alances a sli with t thg eht endthou ne of ea t ch ght movement year fleade rom 2007rs t ht ro ofrom all se uward gh 2 01incr 2. ectors. ased exposure to 24 three although there are perc restrictions diver ent of sified the port on participants participating folios and in ong tin h the 4 e oing consistent 01(k) plan immediately upon h contributions sample were helped in their offset 50s ire. the and im 14 pact. percen In the t wecase re in otfh the eir 60 youngest s, compared educational, and scientific functions of the Institute. EBRI-ERF is a tax-exempt organization T attribute he Dece dmb to er those 2013 fuEBRI nds. A Issue n accou Brief nt and balance ICI Resear for each ch part Perspectiv icipant eis re th ported e sum year of th -e e nd participant 2012 acco ’s as unt sets balanc in ale, l funds. asset invested Medianin target-date funds (see Holden et al. 2013b). At year-end 2007, 67 percent of plans in the EBRI/ICI >80% to <1 401(k) 00% plans. At year-end 2012, the 2 average account balance amo F Figure n igu g consis re 12 2 tent participants was 67 percent higher than the average at www.ici.org/pd 50s f/per08-03.pdf 8an .0d www.ebri.org/pdf/bri -2.0 e 6. fs 0pdf/1102ib 2.6.pdf 0.6 8.6 The year-end 2007 EBRI/ICI 401(k) database represents 21.8 million 401(k) plan participants. Figure 14, Younger 401(k) Participants Have Higher Concentrations in Target-Date Funds ........................................ 19 2007 EBRI 20 regula 12 r2 ly 0 07 provides 2012congre 2007 ssion 20 al 12 testimony 2007 , an 20 d 12 briefs p 2007 olicym 20ake 12 rs, 20 mem 07 ber 20o 12 rganizations, 401(k) target- Age d a pa ate nd rticipants, Tenure funds. For of ongoi Consiste exam ng ple, contributio nt analyz 401(k) supported b ing nParticipants s the more y co group ntributions than .............................................................................. of offset co and g nsistent the rants. impact 401( k) of p th articip e stock ants market at year de -e clin nde 2on 012, their the .................. ba data lances show 5  with 27 percent and 11 percent, res pectively, in the entire database. Plan bala 20 nces 3 are constructed as the sum of all participant balances in the plan. allocation, database offer and ed target-date funds in t loan activity Consistent results for heir investment line tSample he EBRI/ICI Had 40 Longer Tenure Than A 1up (k) s, database, 25 percen t which of 401(k) consists ll participants Participants of a larg were e cro holding ss >0% section  to 80 target-d % of 24 ate .0 The year-en60s d 2012 EBRI/ICI 40C 1(ha k) da n t7 age b .9 ass e i repn 1 rese0 nt0 s 2 P 4.- 0 e 1 m r .9 illio cennt 40 1A (k)l p lo lanc pa 6. artti 0 icon t ipantso . Equi 2.t 8ies Amo0ng .9 16.3%8.8 account balanc 8 e among all participants in the EBRI/ICI 401(k) database. The consistent group’s median 16.0% balance was almost and the media on employer benefits. 15.1% The cross-sectional 20EBRI/ICI s 401(k) 3databa 0s se also shows 40s that younger 50p sarticipants and 6those 0s with shorter Alltenures tend to that 4.5 percent, on net, moved aw ay from a zero target-date funds allocation—72.4 percent of this group had no (Figures 5 and 6). Note: Equities include equity funds, company stock, and the equity portion of balanced funds. Funds inc 58 lud .6 e mutual funds, bankc ollective trusts, life All 1 in the EBRI/ICI 401(k) Database 9.9 -2.5 587. .04 at Year-End 2012 2.6 0.1 10.0 Holden, million Consistent 40 Sarah 1(k)Par , plan and ticipants partic Jack Van ipa Hav nD ts. eerhe Accumula C This oi. ns 2004. pa iste pe n te r t“Contri d prese 40 Sizable 1(k) P nb ts ution aa 401(k rtlo ic ng iBeha pa )itu n Account ts d vior inal Be of tana wBala e 401(k e lysis—the n 20 nces ) 07 Pl...................................................... an an anal Parti d 20 ysis c 1ipants 2 of 40 Durin 1(k) g partici Bull an pants d Bear wh o ..... 5  funds, and 7 percent of the assets in the database were invested in target-date funds (see Holden et al. 2008). Figure 15, Cha EBRI/I nges CI 401 in (k) Zero Databa Ase llocation to Target-Date Funds Among Con 54.9sistent 401(k) Participants Between 2007 and three times the median balanc EBRI issues e across all participants at yea press releases on newsworthy r-end 2012. developments, and is among the most widely quoted have lower 401 ins(k) urancbalances e separate accth ount an s, and those any EBRI Issue Briefs powho oled inva es re tment older produc is a monthly or t phave rimarily ilonger nv es tperiodi ed in tenure the s cal ecur with i. ty See ind i icn atHolden -depth ed. Age gevalu roet up ial. s a bt as i2013b. on of em ed on the p ar plo ticiy pan ee t' sbenefi age t issues 50.1 Consistent Participants Have Accumu Changes in Consistent 401(k) Participants’ Account Balances lated Sizable 401(k) Account Balances 49.1 target-date 10 funds at year-end 2007 and 67.9 percent had no target-date funds at 7.8%year-end 2012 (Figure 15). This net Percentage Source: Tabulatioof participants by years of ns from the EBRI/ICI Participant-Directed Re tenure, year-end 2007 and tirement Plan Data Collection Project. year-end 2012 7.0% Percentage of consistent 401(k) participants, Investment Options Source: Tabulations f rom the EBRI/ICI Participant-Direc45. ted7 Retirement Plan Da 6.5% ta Collection Project. 5.9% maintaine Markets.” 5.5% d ac atcounts Nati yearsou -eonal nd 2r 0 each ces 12T . Rax 2 o w o y n pAsso e er ar e cent m from ag ciation ployee es m ay 2 no 0P 0 t be rocee a 7 d dthrou n toe 1fits 0dings, 0 pg eh rby all media. cent 20 Ni b12 ecnety-Sixth aus —that e of roundwa ing.A s nnua not inclu l Confere ded in nce th e on prTaxation, evious re port. November The lon 13–1 gitudina 5, l 5.2% 43.2 2012 .......................................................................................................................... and trends, as well as critical analyses of employee benefit policies and pro ............................ posals. EBRI 20 Note: A target-date fund, whether a mutual fund, bank collective trust, life insurance separate account, or other pooled 4.2% Changes in Consistent 401(k) Participants’ Account Balances .................................................................................... 7  Our 39.2 22 Consistent Sample change reflect Note: A s tar 10.4 get-datpercent e fund, whet moving her a mutual from fund, zero bank cotar llecg tiv et e t-da rust,t le ife fu insnds urancto e s epar at 2.1% least ate account some, , or ot5. her9 pool percent ed inves tmov ment ing prod from uct, some to 35.2 by age, year-e Ynd 20 ears of T 07 an enure d year-end 2012 In For the complete update fro any given year, the change m the year-end in a participant’s 2012 accou EBRI/ICI nt balanc 401(k) e is databa the sum se, see of th Holden ree factors: et al. 2013b. investment product, typically rebalances its portfolio to become less focused on growth and more focused on income as 25 it Y Tren 9 ounger participants o ds in the consistent EBRI direct r th group’s os se with sma membe account rs balances aller init nd other constit ial ba highlight lances experienced higher uen the cie accum s to ulation the informatio effect of percent growth in account n on they need an going 401(kd ) partici undertakes pation. new At analysis 2003, tracks Chicago the ,account IL: 44–5 balances 3. Washington, Notes of 7. is a monthly 5 million DC: Natio 40 pe1(k riod nal )ical pr Tax plan Association. oviding curr participants ent in who formation on a variety had accounts in the of emplo year-end yee ben 200e7 fit 31.0 In the EBRI/ICI 40129 (k) .7 database, investment options are grouped into eight broad categories. Equity funds consist of For statistics typicallyin rebal dicating ances itthe s porhigher tfolio to bepropensity come less focof used withdraw on growth als and m among ore focus participants ed on income as in it ap their proac 6hes 0s, and see pas Holden ses the and target VanDer date hei 0 Changes in Consist approachese and nt 401(k) Participants’ Allocations to Equities and Target-Date passes the target date of the fund, which is usually included in the fund's name. Participants include the 7.5 24.2 Changes zero, and in 62. Co 0nsistent percent 401(k sticking ) Pa with rticipants’ 0 to zero 2 ho A >2ldin llocations to 5gs in> 5 bot to to 10 h Equities 2007 >10 an to an d 20d 20 Target-Date 12. >20 Al to location 30 Funds >3 activity 0 ...................................... did not vary much by ... 11  research on an ongoi topics. ng EBRIef basis. is a weekly roundup of EBRI research and insights, as well as updates on CHECK OUT EBRI’S WEB SITE! Fig year-en ure 16, d of 20 tCha he 12 fund, , nges 15. whi5 cih n perce is10 usual 0 nt P lye inc of rcent luded the iAllocati n co the nsistent fund'on s nam to group e.Targ Age gr et- ha oup d D is ate more based Fun on th d the an s p A ar $200,000 m ticong ipant'sCo agnsistent e in at y their ear-en 401(k 4 d 0 201 12. (k) S ) eac Par e Fcou i ticipants gur nts es at 14 and their Betw 16 een current balances co publications mpared with older partic 100 ipa Mov ned ts o Aw r tho ay frs om e with larg Remained er in Movitial balances ed to 100 . Three primary factors impact EBRI/ICI 401(k) databas million e 401 a (knd ) plan each partici pa subs nts wie thq acuent count ba year lances athr t the o enugh d of ea cyear- h year fren om 20 d 07 20 th12. rough 2012. Age group is based on -1.6% 2002. pooled In inv addition, estments nonhardshi primarilyp invested withdrawals, in stwhich ocks, includin are gene g rally equity limited mutu to al employees funds, bank who collectiv are aged e trus 59-½ ts, or life older, insuran constitute ce 23 -2.0% Funds ? New contributions by the par surve ticy ipant, s, studi the es, litig employer, ation, leg or isl both; ation and regulation affecting employee benefit plans, while The EBRI/ICI for additional 401(k) detaildatabas . e environment is certified to be fully compliant with -4.2% the ISO-27002 Information Security Audit participant ag e. EBRI the pmaintains an articipant's age at year d -eanaly nd 2012.zes the most comprehensive database of 401(k)-type programs in the Percent in 100 Percent by at 100 Percent by Net 100 Percent Holden, Sarah, Jack VanDerhei, Luis Alonso, and Steven Bass. 2013a. “401(k) Participants in the Wake of the Financial acco employers, unt balanc 2007 whes: co a ile nd a2012 nother ntributions, 4% ................................................................................................................. 16.2 investment percent had returns, between and wi $100 th ,000 drawal/loan activity. The pe and $200,000 (Figure rcent change i 3). In contrast, n average in ...................... the broade account r 20 Exposure to Equities Has Declined Slightly Among 5% Consistent 401(k) Participants Between 205% 07 and 2012 ............. 14  -10 separate accounts, and other pooled investments. Similarly, bond funds are any pooled account primarily invested in a majority of all withdrawals (see The Vanguard Group 2014). EBRI’s Blog supplements our regular publications 9% , offering commentary on questions Evidence of Reallocation Activity world. Its computer to or from Equities A simulation analys m eong Cons s on Social istent 401(k) Participants Security reform and retireme nt income adequacy standard. Moreover, EBRI Agehas obtained 2007 a legal opinion 2012 that the Permethodolo cent gy 2012 used meets Change the privacy sta in 2012 ndards of the Gramm- Analysis of a group of consistent 401(k) plan participants provides insight into how these investors reacted to the Crisis: Changes in Account Balances, 2007–2011. Data Security ” ICI Research Perspective 19, no. 7, and EBRI Issue Brief, no. EBRI/ICI 401(k) database, 8.5 percent had accounts with more than $200,000, and 9.5 percent had between $100,000 balance of participants in their 20s was heavily influenced by the relative size of their contributions to 10% their account balances 14% received from 11% news reporters, policymakers, and others. EBRI Fundamentals of Employee bonds. EBRI’s website is easy to use and packe Balanc 200ed 7 fun 20d 12s are2 00 pooled 7 201 account 2 200s 7 invested 2012 in20 bo 07th d with useful information! Look for stocks 2012 and 2007bond 201 s. 2 They 200 are 7 classifi 2012 ed into two ? Total investment return on account balances, which depends on the performance of financial markets and on Changes in Co are nsistent uni 20sque. 401(k 12. ) Pa 7 rticipants’ -6.Allocations 3 to 6.4 Equities ............................................................ 5.7 -0.6 12.1 ........ 14  About 10 percent of consistent 401(k) participants had their entire 401(k) balances invested in target-date funds, and At year-end 2007, 9.9 percent of consistent 401(k) participants had their entire account balance invested in target-date Leach-Bliley Act. At no time has any nonpublic personal information TM that is personally identifiable, such as a Social Security financi Movement 10 al crisis in th of e 2 conc 008entrati , because on of the equities same iin nvestors 401(k) can partbe icip observ ants’ accou ed before nts results (year-fro end m20 chang 07) a en s d in aft stock er (yvalues, ear-end in 2012) 391 -20 (October). Available at ww Benefit Programs w.ici.org/pdf/per offers a straightforward, b 19-07.pdf and www.ebri.org/pdf/bri asic explanation of efspd emplo f/E yBRI_I ee benef B_0 it programs in 10- and increased T and h At e $2 EB year-end 00,0 RI/IC 00. I at a compound average growth rate of 41.8 P 2 012, artici60 pan percen t-Direc t tof ednon–target-date Retirement Plan balanced Datab percent per ye a se fund has assets were assumed to been ar between ye 17%the subjectar-end 2007 a of be invested in multiple in ndepen d year-end 201 equities (see dent secu 2. rity Target-Date Fund Use Rose Substantially in the Entire EBRI/ICI 401(k) Database subcategories: target 20s -date 30s funds 30s 15. an0d non–target-date 40s-6.3 balanc 50s8.7 ed funds. A 5.60s target 4 -dat -0.e 9fund All typi 14.1 cally rebalances its the allocation of assets in an individual’s account; and on net, these special features: very few participants changed their positions to or from this concentration between year-end 2007 and year- funds, number, been t essentially ransferred to or shared with E the same share as at year-en BRI. d 2012, but small movements to or away from such a full allocation the additio financ n to ial rea market llocation crisis. activity The by annthe priv participa ual EBRI/ICI atn e and ts. Although 40 public s 1(k) data einfo ctors base rmation . The upEBRI Data dates on speci provi book on Emplo fic de tra ad snapshot ing activity yee Benefits of of all 4pa 01(k rticipants is a ) partici statistic at paa n al ts is Evidence of Reallocation Activity to or from Equities Among Consistent 401(k) Participants ............................... 15  13.No391.K-Lngtd.pdf audits and has been certified to be fully compliant with the ISO-27002 Information Security Audit standard. Moreover, Investment Company In 40s stitute, Quarterly Su 16.9 pplementary -6.6 Data). 10.3 The allocati4. on 7 to equitie -1.9 s in target-date 15.0 funds varies with the 21% 24% portfolio EBRI make to become s information freel less focused on growt yh av anailable to al d more focusel. d on income as it approaches and passes the target date While target-date fund use was relatively stable in the consistent sample between 2007 and 2012, edging up only reference work on employee benefit programs and work force-related issues. end 2012. Analyzing the group of consistent 401(k) participants at year-end 2012, the data show that virtually none, on varied by participant age. 25% Younger consistent 401(k) participants moved slightly away from a 100 percent allocation, on -3 ® 0 given Refl not ectin availa year gble -en thei id n r ; hi the some gher EBRI o avera f /IC those I g40 e partici a 1(k ge) an data pd an te base, ts nure, are it nte he is w possible co to nsis theitent r to 401(k obs gro) e up rv pl e ans al s activity o and had perha m movin edia pn s g an new aw d ay aver tof rom investing, age o r account to zan ero d bal or th u a 10 s n c 0 may es 401(k) p Soa urc rt e:i T c abu ipla ant tionss fr t om e the nd EB to concent RI/ICI Participant-Dirr eat cted e t Reti h reei mer account nt Plan Data Collec s i tion n eq Projecuit t. y securities. The asset allocation of the 7.5 million 50s 14.9 -6.3 8.6 4.0 -2.3 12.6 • EBRI’s entire library of research publications starts at the main Web page. Click on EBRI EBRI funds’ Exposure target-dates. has o b to tained Target-Date For a le target gal o Fu -date pinion nds funds, Has thatIn the investors cre metho ased Sl were dight ology ly assu A used m med ong m to eets Co be nsin th istent e a pr fund ivacy 401 whose (k) stan Par targ dards ticipants et date of th Betw e was Gramm-Leach een nearest 2007 to their - B liley 24 ? Withdrawa EBRI ls, assume borrowi s ng, a publi and cloa service re n repaym spo ents. nsibility to make its findings completely accessible at www.ebri.org of the fund, which is usually included in the fund’s name. Non–target-date balanced funds include asset allocation or Note: Equities include equity funds, company stock, and the equity portion of balanced funds. Participants include the 7.5 million 401(k) plan participants w ith account slightly, Acco unt balan target-date ces are net o fund use f unpaid lo has increase an bal d a substantial nces. Thus, ly uin npaid the ent loan ire bala cross-sectional nces are not included EBRI/ICI in 4any 01(k) of the database eight asse over t the net, moved to or from a 100 percent target-date funds allocation—9.9 percent of this group at year-end 2007 and net, Holden, while Sarah older , Jack consistent VanDer 401 hei, (k) Luis pa rticip Alonsants o, and edge Steven d toward Bass. a 2013b. 100 pe rcent “401(k) allocati Plano As n to set tar Allocation, get-date fu Account nds, on Bala net. nces, For not perce have nt e q ex uity perience holdings d a at dire ye ct ar-e impact nd. of the financial market crisis on their savings. In other words, new participants 401(k) that weplan re mparticipants uch higher 60s in tha the n -33.8% the consistent me 13.4 diangroup and avera was -5.5broadly ge accosimilar unt 7.9 bato lanc the esasset of 3.8the allo bro cation a -1. der 7 of EBRI/ the 11. 24.0 ICI 7 401 milli (k) on particip databasants e (Fig in ure balances at the end of each year from 2007 through 2012. 26Age group is based on the participant's age at year-end 2012. See Figures 10 and 12 for additional detail. Act. At no Issue Briefs tim — e has so that all deci any and nonEBRI Notes -pus blic ions person that for our in-depth and al relate to emp information loyee that is ben person nonpartisan periodicals. efits, ally wheth identi er fiabl made e, such in Cong as Soc ress ial or bo Security ard Nu room mber, s or 65th birthday. and 2012 ...................................................................................................................... The equity portion was estimated using the industry average equity percentage for the .................................. assigned target-date 16  Contact EBRI Publications, (202) 659-0670; fax publication orders to (202) 775-6312. hybrid funds, in addition-37.0% to lifestyle funds. Company stock is equity in the 401(k) plan’s sponsor (the employer $49,814 ). same categories described. -40 period. At year-end 2007, 27.6 percent of 401(k) participants in 36% the consistent sample owned target-date funds, 10.0 perce Percen nt tages at m ye ay ar-e not adn d to d th201 e total2 b w ecae usre e of 10 roun 0 dipe ng. F rce undsn in t ci lud ne vm eus tua ted l fu nidn s, ban tar k g coet-dat llective tru e stsfunds , life insur(Figur ance sepe arate 16 a). cc oHowev unts, and an eyr, poo even led inves thou tment gh exampl and e, Loa 21.6 n Acti perc vity ent in Ao llf20 co 12.” nsistent ICI 15.2 Resear 401(k)ch partici Perspectiv -6.2pants e in 19, the 9.0 n ir o2 . 0 12 s , ha an d d 4. 14EBRI 00 percent Issue -1.8 of Brief the , in 13. r o401 . 439 (k 4 ) (De account cembe inves r). ted in ® might 4). At year be wi -en llindg 2to 01invest 2, the iav n equiti eragee 4 s 0becau 1(k) account se they balan did no ct e dir of ethe ctly consi expesrience tent grou thep impact was $1 of 07,0 the53, fina 67 ncial perc mark ent lar et g crisis er the entire year The change in families’ -end 2012 EBRI/ICI 401(k) database. On ave any indivi hodual mes, partic are based ipant’s on the highe account balan st cre qualit age, is i about three-fifths of 401(k) participants’ assets were nfl y, uenc most depe ed by the nda magn ble itudes informatio of th n. ese EBRI’s Web three factors site posts $44,057 Subscriptions to EBRI Issue Briefs are included as part of EBRI membership, or as part of a 27 been fund calculated transferre using the d to or shar Moed rningstar Lifecy with EBRI. cle Allo 25%cation Index. $42,072 product primarily invested in the security indicated. Age group is based on the participant's age at year-end 2012. Row percentages may not add to 100 percent because of Money funds consist of those funds designed to maintain a stable share price. Stable value products, 24% such as GICs Source: Tabulations from the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. compared Orders/ Changes within 25.1 Consistent percent401(k of the ) Pa year-end rticipan2007 ts’ Allocations cross sect to ion Target (Figur -Dat e 1e 4). Funds By y e ................................................... ar-end 2012, ownership in the . 16  Among there • was consist Visit EBRI’s blog, or subscribe to the EBRI nearly ent no 40net 1(k) ch par antge, icipants some bet par wteen icipants year-end did re200 allocate ef7 e-lette an d thei year r. r assets: -end 2012, 2.5 percent few moved of co to nsistent ward, or 4 0 away 1(k) from, target-date Available fu nds at wat ww.ici.or year-en g/ d pd 2012, f/per1 com 9-1p 2ared .pdf and withww 26.3 w.e perc bri.o ent rg/at pdf ye /bar-en riefspdf d 20 /EBRI 07 (Fig _IBure _012 13 -1 ). 3.No At the 394oth .401k er -Upd end of ate- the on a retirem rounding. eall nt Percresea account, entages ar rch e do w lfinding larhile -w eighted ths, ose avpubli erawho ges. c ations, held 40an 1(k d ) n ae ccounts ws alert throu s. EBRI also exte gh the stock market nds its e volatili duca ty tion might and pu have bli a c service invested in equities, either thr than the average account bal oa ugh equity f nce $199 annual sub of $63, u9 nds, the equity 29 amo scription ng $34,721 par po to ticipan rtio EBRI Not n o ts fin target- e ts he and ent date funds, EiBRI Issue re EBRI/ I the equity po Brie CI 4fs 0. 1Change of (k) dat rtio abase. n o Address: f no The n–targ m EBRI, eet- dian da te 25 relative to the starting 26% Nacco ote: Equ u itn ies t inc ba ludlance. e equity f un Fo ds,r coexam mpany sple, tock, a na d th ce o eq ntributio uity portion on f bof alan a cedgive funds.n Par dollar ticipants amount include the 7.5produ million ces a larger growth 28 -50 This system of classification does not consider the number of distinct investment options presented to a given participant, and other stable value funds, are reported as one category. The other category is the residual for other investments, consistent sample had increased to 32.1 percent, while ownership of target-date funds in the 2012 cross section had $28,358 401(k) plan participants with account balances at the end of each year from 2007 through 2012. Funds include mutual funds, 11 these particie px ants treme m role o s ved of to improving Ameri ea qw uity ay hol from dings; the 1100 13th St. NW, Suite 878, Washington, 100 in c addit an per s’ cent ion, finan ther alcial location e kn was owle to only something dge a slight through net less, its a DC, 20005-4051, (202) 659-0670; fax number, moveme 2.6 ward perc nt -win ent towar ning moved d p re ubli duc to ca e se d 100 ex rvice posure perc cam ent to paign age 201 spectrum, 2.pdf 200 consistent 7 401(k 200) 8 participants 200 in 9their 60s moved 2010 toward a 100 2011percent concentr 2012 ation in target 2013 -date 401 different (k) Evidence accou reaction. ntof bala Reallocation To nce gaamo in insight ng Act thie vity into consistent to the or reaction from partici Tar og fp et ant 401(k -Date s was ) plan Funds $49, parti 814 Among c ipants at year Consistent to -e the nd 2financi 012, 401(k almost al ) mark Partth icipa et ree crisis ntim ts ............... e an s d the ev ents 17  balanced funds rate For wa hen description added , or company stoc to of a the small inves er taccount ment k. Younger 401(k) particip options, than it see woul page d if21. adants tend to ha ded to a largeve hi r one. gher conc On the entrations in equities than older other hand, investment returns of • Subscriptions EBRI’s reliable health and retirement surveys are just a click away through the topic boxes at 29 bank collec® tive trusts, life insurance separate accounts, and any pooled investment product primarily invested in the security but rather, the types of options presented. Preliminary research analyzing 1.4 million participants drawn from the 2000 Sample of C All age groups onsistent 4 in the sample 01(k) of consiste Participants, 2007–2012 nt 401(k) participants moved away from high or full allocations to equities such as real estate funds. The final category, unknown, consists of funds that could not be identified. (202) 775-6312; e-mail: subscriptions@ebri.org Membership Information: Inquiries increased conC sh iderably oosetoSave more to and 41.0 the perc coent mpanio (an n increa site s ww e of w.c 15. hoo 9 per setcosav entage e.opoints rg ). Because target-date funds are equiti allocation, $18,942 es. For an e d x7.4 ample, percent anal yzing stuck the wit h gro a u 10 p 0of percent consistent allocation 401(k) to pa ta rticipants rget-dateat funds year-end in both 2012, 200t7 he an data d 20s 12. how In tha other t $17,794 $17,686 $17,630 funds, on net: 8.8 percent indicate d. o f A gconsistent e $16,573 group is based o4 n t01(k he parti) c ippartici ant's age ap t ya ents ar-end in 201t 2.heir 60s had 100 percent of their 401(k) account of 2008 through 2012, changes in their allocations to equities overall—and to target-date funds, in particular—are 401(k) medianparticip account ants. balance of $17,630 for participants in the entire EBRI/ICI 401(k) da $16,649 tabase. a given percentage produce larger dollar increas 19%es (or decreases) when compounded on a larger asset 15 base. In other Sources:the top of the page. Bloomberg, Barclays Global Investmen ts, Frank Russell Company, and Standard & Poor's. Target-Date Fund Use Rose Substantial regarding EBRI ly in membership an the Entire EBd/or con RI/ICI 401(k tributio ) ns Database to EBRI-ER 20............................................. F should be dir 20% ected to EBRI 19  betw EBRI/ICI 401(k een year-end ) database sug 2007 and gests that the year-end 2012 sheer number , with older pa of in rticipants vestment movi options ng mor presented e than younger does not ones. influence For participants. example, 12 1 $12,655 Holden, often used Sarah as , a Jack default Va nDer investment hei, Luis opt Alons ion o in, 401(k) and Crai pla g n Cs opelan with automatic d. 2008. “401(k) enrollment, Plan Asset some Allocatio of their n , growth Account is related All indexes are set to 100 in December 2006. 29% About 1.7 words, For perc an 34 thr ent, analysi perc ee-oquarters n ent, s net, of or contribution moved 17% 7.5 of co million, nsistent to a acti zof ero vity durin th 40 equit e 1( 401(k k) ies partici g the bear mar ) allocatio partici pants pn an —10. with ts ket of 2000–20 with t9 h eir pe accoun rcen 401( t k) of ts 02 us accounts tat his th ing gro e ethe u np fd ully of had cross-sectional inv 20 no 07 ested equiti in the in e s target-date EBRI/ICI EB at Ryear I/ICI 4 -e 401(k) nd 0 funds 120 (k) 07at invested in target-date funds at year-end 2012, compared with 7.9 percent at year-end 2007. examined. For the most part, despite periods of market uncertainty and volatility, there were relatively small changes in words, 2 growth rates are a function President Dallas of the relative Salisbur size ofy the at thdollar e above adju address, ( stment 202) 659-0670; to the size of e-mail: the in salisbur dividual y@ebri.org account . The S&P 500 index measures the performance of 500 stocks chosen for market size, liquidity, and industry group representation. On average, participants had 10.4 distinct options but, on average, chose only 2.5 (see Holden and VanDerhei 2001). In 57.8 percent of consistent 401(k) participants in their 20s had more than 80 percent of their account invested in EBRI is supported by organizations from all industries and sectors that appreciate the value of Balances, and Loan Activity in 2007.” Investment Company Institute Research Perspective 14, no. 3, and EBRI to About the 3 • the spNeed a number? Check out the rea EBRI/ICI d of automatic 401(k) e Database nrollment ............................................................................................ in recent EBR yeI Databook on Employee Benefits. ars. This helps to explain the relative stability of the ........................ consistent 20  database 4 and year-en 01(12. k) a 6 d c c perc 20 are ount 07 ient n wer b the aha la e n consiste d fully cno es tend equities invnt ested esample. d to at in in year-end tar cr e Tg a het sese e-date with consistent 20 12 fboth unds (Fig age at ure p ye artic an 11 ar-end d ). ipants tenure This 2 0 net h1 ad among 2. ch acco This ange unts thi he gh re co fat lle ects nsistent vel the 3.3 of en persistence d perce gro of u ea p nch of t moving partici year in tar from pg fro ant etm -date 2007 s, zero as More consi Exposure to Target-Date Funds Has Increased databases, see The Russell 2000 ste Holden and Va index nt 401(k measures ) the p perf lan p nDerhei 2004. ormancart e of i the ci2, p 000 ant smThe a s alles hel t U.S. d n t alysis fi com arg panies et-d S (bas nds that lightly Among Consist ed at on e f totund al , m overa arks at et capit ll, y aliz 401(k) e atar-end ion) included participants’ 2012 t in ent 401(k) the Russell han at 3000 contribution index y Participants (w ehic ar-end h tracrates ks the 20 3,000 were 07, larges on little t consistent 401(k) plan participants’ exposure to equities or target-date funds between year-end 2007 and year-end U.S. companies). addition, equities at the ye preliminary a5r-end 201analy 2, cosis mpared found w that ith 60.2 401(k) p ercent particip aants t year- are end not 2 n0 a07 ïve—that (Figures is, 9 when and given 10). Thos n options, e figurthey es incl do unot de 12.1 unbiased, reliable information on emplo 19% yee benefits. Visit www.ebri.org/about/join/ for more. sample Issue Editorial Bo as Brie compared ard: f, no Dallas L . 324 with .(Decem Salisbur the cryoss ber , publisher )secti . Availa o ; Stephen Blakely ns, ble whe at re ww ne w.ici.or ,wly editor e.n Any g/ rolle pdf views d /pparticipants er1 expr 4-es 0sed in this p 3.pd fare an d inclu ublicat de ion and th d, ma 17% ny ose o of f th whom e author cs sho ould ulhave d th net changed in 2 Evid they equiti fund rou ; a t en d inv g eo h s ce o h esting in to 20 irthe d 12 at f of Reallo 00 .le 0, 2001, and 2 cross- was t ast Th hose w ese catio some, osectional b 15% served 7.in 5 t Activity to h 5. mi targ 0 002 when compared to 1999. On aver lacross lion percent EBRI/ et 401 -d Iall o at CI (k) mov re f pa from T 401( pa u ring tnd rticipants icipant k) s hel from a datab rg eages, d t-Dat some all am se. a of e ke although F Yo to tu u h un z n p ei e d a ger ro, r 401(k s Amo gr age, an th parti ou e d p 40 n l7.6 o ) g of c account west 1(k) ipants Co consistent perc n participants’ s lev isten ent or e i l tho n o sti t t f partici 401( c s partici ae king rg wi cont et k) Partici th p with -d pants ants ribution shorter at e f ze (o re r p u o r an mainin nd a job behavior holdings ts s. lo At year-end ngitu tenure g 1 d 0 does in in 0at both a percent l their not Altogethe Between 20 4 2007 r, fro07 and 2012 m year-end 2007 2008 through year-end 2009 2012, the average 2010 account balance amon 2011g the group of consis 2012 tent 201 Sources 2. Form erly the and Lehman Types Brothers of U.S. Data Aggregat ..................................................................................................... e Bond Index, the Barclays Capital U.S. Aggregate Bond Index is composed of securities covering government and corporat .......................... e bonds, mortgage- 20  • Instantly get e-mail noti?cations of the latest EBRI data, 10% surveys, publications, and m 0% eetings not be ascribed to the officers, trustees, members, or other sponsors of the Employee Benefit Research Institute, the EBRI Education and divide their assets among all n. Indeed, less than 1 percent of participants followed a 1/n asset allocation strategy. Plan percent of consistent 401(k) participants in their 20s who had 100 percent of their account invested in equities at year- backed securities, and asset-backed securities (rebalanced monthly by market capitalization). The index's total return consists of price appreciation/depreciation plus income as a percentage of the www.ebri.org/pdf/briefspdf/EBRI_IB_12a-2008.pdf been automatically enrolled into a target-date fund. In addition, the offering of target-date funds in 401(k) plans’ current 200 allocated sample), 7 an employer d w to 20 hic ta 12 h rget-date . removes Whil tene de youn dfu tto h nds e ger have effrom fect 40smalle 1(k o2007 f )parti par r t ato cipants ccount icipants 2012 (69 balanc awer nd percen pl e ans es, more whi ente t) like was le ring t ly h see ose to an n move d w amon h leo avin were to g g hol consi th ol de ider n s data g tent some orbase. ha 40 d 1 e( q lo k) Iuit nit ng participants ies ially, er than job this te older nure grou in 401 tp heir w(k) as partici 2007, 27.6 percent of consistent 401( appear to have pants inc been materially affected b reased by nearly 40 perce k) plan y the bear mar nt, participants rising from khe et $77, ld in at equities 04 least 9 at some ye from ar-en targ 2000 d et-date fund assets in 20 throug 07 toh $1 2002, 07,053 wheth at their year-en er measured 401(k) d 20accounts. 12 in dollar S Movement ource: Tabulations in from the the shar EBRI/IC e of I Parti ta cirget-date pant-Directed R fu etirem nds ent in Plan 401 Data (k) Collecti pa orticip n Project. ants’ accounts results from changes in the value of their orResear iginal inve ch Fund, stment. or their staffs. Nothing herein is to be construed as an attempt to aid or hinder the adoption of any pending legislation, regulation, and seminars by clicking on the “Notify Me” or “RSS” buttons at the top of our home page. Consistent Sample in 2007 EBRI/ICI 401(k) Database in 2007 Consistent Sample in 2012 EBRI/ICI 401(k) Database in 2012 1 Investment Options ......................................................................................................................................... 21 20  Sponsor end 2012, Council compared of America with 1 2013 2.7 perc indicates ent ful 8th ly at investe among d the in equiti 686 plans sur es at yevaery -en ed in 2012, th d 2007. At e average the other num end ber of investment of the age The year-end 2012 EBRI/ICI 401(k) database represents 24.0 million 401(k) plan participants. investment lineups has increased, resulting in more participants having the opportunity to select target-date funds. Changes in Consistent 401(k) Participants’ Allocations to Target-Date Funds At year-end 20 amounts tende partici 20s. demogra or interpretative d p ants to p or hic hav percentage , al oe 12, that share lder ly hisimilar ru gher le, or as 401(k of acco to ) legal, sala pa th unt had risen to 32 rticipants e ry acco ent balanc they unting, ire contributed. E es. dis B actuarial, o RI/ICI p For l.1 percent as ayed e4x r0 other such prof s ample, 1 lig (k) htly dat mo within ha igh re 401(k) participants added some target-date fund ass base essional advice. er the rea at llocat year cons-istent iend on ww activity w. 20 grou ebri. 07. o p, Ho toward rgamong wever, a 40 zero by 1(k yea equities ) rpartic -end ipants 201 allocati 2, ets to twith h on. ese five 2 (Figures 4, 5, and 6). This translates into a compound annual average growth rate of 6.8 percent over the five-year target-date Participants include fu the nd 7.5 assets m illion 401(k) relat plan ive parti to cipants the wot ith he account r investments balances at the end in of th each e 4 year 01( from k) 2007 account, through 2012. which depends on the relative Investment fund options Co avmpany ailable fo In r stitut participant e. Quart coerly ntribS uu tions pplementa was 19. ry Aon Data Hewitt . Washin 201gton, 3 indicates DC: Inves an average of 20 i tment Compa nn vestment options in y Institute. N spectrum, ote: Account balco ances nsistent are partici40 pant1(k account ) partici balances pants held in 401 in their (k) plans 6 at 0the s mov participants' ed a current way em from ployers high and are conce net of pl nan trations loans. Retiin rem equit ent savings ies: hel23. d in pl 5 ans perc at previ ent ous of Source: Tabulations from the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. References ............................................................................................................................... There’s lots more! ........................... 21  Some years particiof p of ants tthese enur had e older at grown yepartici ar-end olde pr, 2012, ants’ accrue activity older d lon pa c go rticipants er uld job have tenure tbeen end s, ed and into antici accumu have pati hion gher lated of balanc retirem larger es ac ent t count han rather you balanc n tha ger n e s participants: in compare response d wi t o Th th ose perio their 401(k) accounts than re d. The median account moved them e balance amon ntirely g this , around a substantial c consistent group also ore that held them grew, rising 76 percent in both fro periods m $28,3 . At 58 year in 200 -end 7 to em performa Betwe ployers en or rol nce year- led over oend f into stocks IR 20 As 07 are versu not an incl d s uded. year-en fixed-income d 2012 , securiti consistent es, in40 addi 1(ktio ) pa n r to ti crea ipallocation nts’ use of activity targetby -daparticipa te funds nin ts. crAlthough eased slightly, Note: The EBRI/ICI 401(k) database contains 21.8 million 401(k) plan participants at year-end 2007 and 24.0 million at year-end 2012. Participant tenure is EBRI Issue Brief is registered in the U.S. Patent and Trademark Office. ISSN: 0887 ?137X/90 0887 ?137X/90 $ .50+.50 13 2012. consistent Deloitte 401Consulting (k) participa LLP, nts Internationa in their 60s l Foundation had more th of an Employee 80 perce Benefit nt of the Plans, ir acco anunt d th e investe International d in equities Society at of year Certified -end Data from the tenure ICI Surve as of the year-end y of D indicated.T efined Contribution Plan Record he consistent sample consists of 7.5 million keepers find t 401(k) plan participants hat DC plan with account balanc participants generally stayed the es at the end of th financi in partici 201 th 2, eir p 10.0 al ants 20s mark p at ie n rcent et year-en the movements year-en of d consis 20d 12 .2012 tent Indeed, had4 cross an 01 ( avera k) hous section. plan ehold ge pa acrticip count survey ant bal s in , a fo or nce rmation near of ly $22, on in1 dicates e-thir 47, com d o that fp thos are ho d e useholds with holdan ing av a an ny era tictarget-date ig pate e of rebalanci $53,56 fu 5 nd n for g $49,814 in 2012 (a compound annual average growth rate of 11.9 percent) (Figure 4). with few participants moving into or out of these f1100 13 unds. At St year- reet NW · Suite 878 end 2007, 27 .6 percent of consistent 401(k) information Endnotes ...................................................................................................................... on specific trading activity of 401(k) participants is not available in the EBRI/ICI ...................................... 401(k) database, it is 23  Investment Co each mpany year from I 2007 nstitut through e. 2012. 2014. Components Visit EBRI on-line today: “The may U.S. not add Retirem to 100 percent ent because Market, of rounding. www.ebri.org First Quarter 20 14” (June). Available at Employee Benefit Specialists 2013 reports that the average number of funds offered by the nearly 400 401(k) plan sponsors 2012, compared with 32.6 p 18 ercent at year-end 2007. Those figures include 11.7 percent of consistent 401(k) course through the financial crisis. The vast majority of DC plan participants continued contributing and only a negligible share Washington, DC 20005 their partici portfol pants iios n their as they 60s age. with five years of tenure (Figure 5). Among consistent participants in their 60s at year-end assets, exclusively held target-date fund assets. partici possible pants to observe held at lactivity east some into target-d or out of ate zero fund or invest 100 per ments cent in in their vestment 401(k) in target-da accounts, te and funds that at sh year-en are incd. reased slightly www.ici.org/info/ret_14_q1_data.xls (202) 659-0670 © 2014, Employee Benefit Research Institute ?Education and Research Fund. All rights reserved. www.ebri.org www.choosetosave.org ebri.org ebri.org ebri.org ebri.org ebri.org A ebri.org ebri.org ebri.org ebri.org ebri.org ebri.org ebri.org ebri.org ebri.org ebri.org ebri.org ebri.org ebri.org monthl ebri.org Issue Brief • July 2014 • No. 402 ebri.org Issue Brief • July 2014 • No. 402 ebri.org Issue Brief • July 2014 • No. 402 ebri.org Issue Brief • July 2014 • No. 402 ebri.org Issue Brief • July 2014 • No. 402 ebri.org Issue Brief • July 2014 • No. 402 Issue Bri Issue Bri Issue Bri Issue Bri Issue Bri Issue Bri Issue Bri Issue Bri Issue Bri Issue Bri Issue Bri Issue Bri Issue Bri Issue Bri Issue Bri Issue Bri Issue Bri Issue Bri y research e e e e e e e e e e e e e e e e e effffffffffffffffff • July • July • July • July • July • July • July • July • July • July • July • July • July • July • July • July • July • July report 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 from 14 • 14 • 14 • 14 • 14 • 14 • 14 • 14 • 14 • 14 • 14 • 14 • 14 • 14 • 14 • 14 • 14 • 14 • the No. 402 No. 402 No. 402 No. 402 No. 402 No. 402 No. 402 No. 402 No. 402 No. 402 No. 402 No. 402 No. 402 No. 402 No. 402 No. 402 No. 402 No. 402 EBRI Education and Research Fund © 2014 Em ployee Benefit Research Institute 13 10 12 9 6 8 19 16 11 18 17 15 14 22 24 20 21 25 23 5 4 2 3 7 Figure 8 Figure 6 Average Asset Allocation of 401(k) Accounts by Participant Age Figure 5 Changes in 401(k) Account Balances Among Consistent 401(k) Participants from 2007 Through 2012 Percentage of account balances, year-end 2007 and year-end 2012 401(k) Account Balances Among Consistent 401(k) Participants from 2007 Through 2012 Percent change in average 401(k) account balance among consistent 401(k) participants by age and tenure, 2007–2012 Average 401(k) balance for consistent 401(k) participants by age and tenure, year-end 2007–2012 Year-End 2007 Compound Annual 2, 3 Target-date Company Memo: Equity Non–target-date Bond Money GICs and other Average Growth Rate, Tenure (years) Age Group 2007 2008 2009 2010 2011 2012 1, 2 2 4 Age Group Tenure (years) funds 2007–2008 funds balanced funds 2008–2009 2009–2010 funds funds 2010–2011 stable-value funds 2011–2012 stock 2007–2012 Other Unknown 2007–2012Equities Age Group 20s All $3,871 $4,192 $10,284 $14,993 $17,802 $22,161 20s All 8.3% 145.3% 45.8% 18.7% 24.5% 472.5% 41.8% 20s 42.1 22.2 7.3 6.5 5.0 6.7 8.9 0.7 0.6 75.2 >2 to 5 2,535 3,364 10,444 15,544 18,567 22,147 >2 to 5 32.7 210.5 48.8 19.4 19.3 773.6 54.3 30s 55.3 >5 to 10 11.6 4,301 6.9 4,6437.7 2.9 11,138 4.2 16,371 10.0 19,673 0.8 24,971 0.6 79.3 >5 to 10 8.0 139.9 47.0 20.2 26.9 480.6 42.2 30s All 22,472 15,802 29,978 38,753 42,432 50,536 40s 57.5 8.2 6.4 7.8 2.8 4.7 10.9 1.2 0.5 78.2 30s All -29.7 89.7 29.3 9.5 19.1 124.9 17.6 >2 to 5 11,764 8,342 18,995 24,853 27,237 31,601 50s 50.9 7.3 7.1 8.6 3.5 8.0 12.4 1.7 0.4 71.7 >2 to 5 -29.1 127.7 30.8 9.6 16.0 168.6 21.9 >5 to 10 16,673 12,439 26,376 35,472 39,929 48,534 60s 43.6 7.5 7.5 10.8 4.9 12.8 10.7 1.9 0.3 61.8 >5 to 10 -25.4 112.0 34.5 12.6 21.6 191.1 23.8 >10 to 20 38,429 25,681 44,892 56,216 60,499 71,082 5 All Consistent Sample 49.9 7.6 7.0 9.2 3.9 9.0 11.4 1.6 0.4 70.1 40s All 58,769 37,474 63,275 76,649 80,726 93,061 >10 to 20 -33.2 74.8 25.2 7.6 17.5 85.0 13.1 6 EBRI/ICI 401(k) Database 48.2 7.4 8.0 8.3 4.2 10.6 10.6 2.1 0.7 68.0 >2 to 5 24,355 15,104 29,857 36,928 39,338 44,530 40s All -36.2 68.9 21.1 5.3 15.3 58.4 9.6 >5 to 10 33,099 21,884 42,230 53,735 58,297 69,039 >2 to 5 -38.0 97.7 23.7 6.5 13.2 82.8 12.8 Year-End 2012 >10 to 20 71,023 44,111 75,469 91,030 95,705 110,309 2, 3 >5 to 10 -33.9 93.0 27.2 8.5 18.4 108.6 15.8 Target-date Company Memo: Equity Non–target-date Bond Money GICs and other >20 to 30 1, 2 113,072 72,077 111,157 130,211 135,288 2 152,900 4 >10 to 20 -37.9 71.1 20.6 5.1 15.3 55.3 9.2 Age Group funds funds balanced funds funds funds stable-value funds stock Other Unknown Equities 50s All 103,946 67,240 104,286 121,539 126,524 141,402 >20 to 30 -36.3 54.2 17.1 3.9 13.0 35.2 6.2 20s 36.0 28.4 8.5 7.9 2.8 3.9 9.2 1.3 2.0 75.8 >2 to 5 30,628 19,312 36,266 44,118 47,196 52,952 50s All -35.3 55.1 16.5 4.1 11.8 36.0 6.3 30s 42.2 15.0 16.2 8.0 2.8 3.5 7.3 1.6 3.4 72.7 >5 to 10 40,108 26,678 49,068 61,230 66,635 77,808 >2 to 5 -36.9 87.8 21.7 7.0 12.2 72.9 11.6 40s 47.8 12.7 6.4 10.6 3.8 5.5 9.2 2.4 1.6 71.3 >10 to 20 86,988 54,588 89,869 106,365 111,578 126,448 >5 to 10 -33.5 83.9 24.8 8.8 16.8 94.0 14.2 >20 to 30 163,479 103,500 157,610 180,003 185,088 205,255 50s 39.1 11.7 6.5 13.2 5.3 10.0 9.8 3.2 1.3 60.6 >10 to 20 -37.2 64.6 18.4 4.9 13.3 45.4 7.8 >30 191,482 127,047 183,393 209,061 216,456 235,093 60s 31.9 11.1 6.4 16.0 6.9 15.4 8.4 2.8 1.1 49.6 >20 to 30 -36.7 52.3 14.2 2.8 10.9 25.6 4.7 5 60s All 131,032 86,037 125,019 138,918 139,744 147,600 All Consistent Sample 39.8 12.1 7.5 12.6 5.1 9.6 9.0 2.7 1.6 62.0 >30 -33.7 44.4 14.0 3.5 8.6 22.8 4.2 7 >2 to 5 35,611 23,034 39,915 46,773 49,263 53,565 EBRI/ICI 401(k) Database 60s All 39.2 -34.3 14.9 45.3 7.2 11.8 11.1 4.1 0.6 9.6 5.6 7.2 12.6 3.5 2.4 2.4 61.0 >5 to 10 44,148 29,878 52,345 63,126 67,649 75,797 Source: Tabulations from the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. >2 to 5 -35.3 73.3 17.2 5.3 8.7 50.4 8.5 >10 to 20 93,275 59,302 93,658 107,120 109,879 118,635 1 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. >5 to 10 -32.3 75.2 20.6 7.2 12.0 71.7 11.4 >20 to 30 178,460 114,160 164,977 180,535 179,765 188,321 2 Not all participants are offered this investment option. >10 to 20 -36.4 57.9 14.4 2.6 8.0 27.2 4.9 >30 237,361 157,390 217,117 234,987 232,522 239,425 3 GICs are guaranteed investment contracts. >20 to 30 -36.0 44.5 9.4 -0.4 4.8 5.5 1.1 All All 77,049 50,316 78,829 92,186 95,798 107,053 4 Equities include equity funds, company stock, the equity portion of target-date funds, and the equity portion of non–target-date balanced funds. >30 -33.7 37.9 8.2 -1.0 3.0 0.9 0.2 Source: Tabulations from the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. 5 Asset allocation by age group is among the consistent sample of 7.5 million 401(k) plan participants with account balances at the end of each year from 2007 through 2012. All Note: The analysis is based on a sample of 7.5 million 401(k) plan participants with account balances at the end of each year f All -34.7 56.7 16.9 3.9 rom 2007 through 2012. Age and tenure groups are based on participant 11.7 38.9 6.8 6 The year-end 2007 EBRI/ICI 401(k) database represents 21.8 million 401(k) plan participants. age and tenure at year-end 2012. Account balances are participant account balances held in 401(k) plans at the participants' current employers and are net of plan loans. Retirement savings held in Source: Tabulations from the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. 7 The year-end 2012 EBRI/ICI 401(k) database represents 24.0 million 401(k) plan participants. plans at previous employers or rolled over into IRAs are not included. Note: The analysis is based on a sample of 7.5 million 401(k) plan participants with account balances at the end of each year from 2007 through 2012. Age and tenure groups are based on participant age and tenure at year-end 2012. Note: Funds include mutual funds, bank collective trusts, life insurance separate accounts, and any pooled investment product primarily invested in the security indicated. Age group is based on the participant's age at year-end 2012. Row percentages may not Account balances are participant account balances held in 401(k) plans at the participants' current employers and are net of plan loans. Retirement savings held in plans at previous employers or rolled over into IRAs are not included. add to 100 percent because of rounding. Percentages are dollar-weighted averages.

Volume 402

Pages 28

EBRI Issue Brief

Jack VanDerhei

Sarah Holden

Luis Alonso

Steven Bass

Retirement