At a Glance | January 2, 2020 What Happens to Asset Allocation When Participants Roll 401(k) Plan Assets Into IRAs? The asset allocation of 401(k) plan participant accounts before a rollover to an individual retirement account (IRA) is compared with the asset allocation in the IRA at the end of the year after the rollover. FROM 401(K) TO IR A Average Asset Allocations Before and After Rollover From 401(k) Plan to IRA By Rollover Balance Assets were much more likely to be in money after a rollover All Balances ($5k or more) $5k–10k $10k–50k from a 401(k) into an IRA. Even though target-date/balanced Equity 48% 45% funds (TDFs) were specifically 47% 42% 41% 37% designed to make the asset 38% 34% 32% allocation process automatic, TDF 23% 28% 25% Money assets are not being allocated the same way when they are 19% 18% 11% 1 14% Other 10% 10% rolled into IRAs. 11% 8% 8% 8% 7% 7% 7% Bond 5% 5% 4% 4% 3% As the size of rollover balances Rollover —— Rollover —— 401(k) Rollover —— > IRA 401(k) > IRA 401(k) > IRA grew, the average asset allocations were increasingly $50k–100k $100k–250k $250k+ likely to look the same after 52% 52% 52% 51% a rollover from 401(k) plans 49% 48% Equity to IRAs. The average equity allocations were virtually equal for balances of $50,000 or TDF 25% Money 23% more. However, the allocation 20% 20% 17% to TDFs consistently decreased, 15% 15% 11% 12% 11% Other 13% 12% while the money allocation 10% 11% 9% 8% 9% 6% 8% 5% 5% Bond 5% 9% consistently increased after the rollover. 401(k) Rollover —— > IRA 401(k) Rollover —— > IRA 401(k) Rollover —— > IRA SHIF TING EQUIT Y Equity Allocation in 401(k) Plans Before vs. After a Rollover Into IRAs (Rollover Balances of $5,000 or More) Of the accounts that started 401(k) Equity Allocation Before Rollover After Rollover Into IRA Similiar Equity Allocation After Rollover with less than 10 percent of assets allocated to equities, < 10% in Equity Less than 10% in Equity 48% Maintained Similar Equity Allocation 52% Increased Equity Allocation in IRA just under half maintained 10–39% 10–39% a similar allocation when rolled 27% Decreased 21% 52% Increased over to IRAs. Of 401(k) plans 40–60% 40–60% with more than 90 percent in 37% Decreased 18% 45% Increased equities, only 30 percent 61–90% 61–90% still had this allocation when 45% Decreased 38% 17% Increased rolled over to IRAs. > 90% in Equity More than 90% 70% Decreased 30% Maintained Similar SOURCE: Craig Copeland, “Comparing Asset Allocation Before and After a Rollover From 401(k) Plans to Individual Retirement Accounts,“ EBRI Issue Brief, no. 495 (Employee Benefit Research Institute, November 7, 2019). 1. Other: Assets that do not fit into the other categories, such as real estate, fixed and variable annuities, etc. © 2020 EBRI This report is copyrighted by the Employee Benefit Research Institute (EBRI). You may copy, print, or download this report solely for personal and noncommercial use, provided that all hard copies retain any and all copyright and other applicable notices contained therein, and you may cite or quote small portions of the report provided that you do so verbatim and with proper citation. Any use beyond the scope of the foregoing requires EBRI’s prior express permission. For permissions, please contact EBRI at permissions@ebri.org.