Summary
Key Findings:
This paper provides an update of a longitudinal analysis of 401(k) plan participants drawn from the EBRI/ICI 401(k) database.
Because the annual cross sections cover participants with a wide range of participation experience in 401(k) plans, meaningful analysis of how 401(k) participants’ asset allocations evolve over their lifecycle must examine the asset allocation of 401(k) plan accounts of participants who maintained accounts over all of the years being studied (consistent participants). A few key insights emerge from looking at the 3.7 million consistent participants in the EBRI/ICI 401(k) database over the four-year period from year-end 2016 to year-end 2020.
- Consistent 401(k) participants’ exposure to equities was relatively unchanged between year-end 2016 and year-end 2020. At year-end 2016, 92.9 percent of consistent 401(k) plan participants held some equities (equity funds, target date funds, non–target date balanced funds, or company stock). This was little changed at year-end 2020, with 94.3 percent of consistent 401(k) plan participants holding equities. Movement toward holding some equities was highest among participants in their twenties: 91.1 percent held equities at year-end 2016, and 96.5 percent held equities at year-end 2020.
- Older consistent 401(k) participants increased their exposure to target date funds between year-end 2016 and year-end 2020. At year-end 2016, 56.5 percent of consistent 401(k) participants held at least some target date fund investments in their 401(k) accounts, and that share increased to 58.9 percent at year-end 2020. The net movement toward target date fund use over the period occurred among consistent 401(k) participants in their forties, fifties, and sixties. Participants in their twenties had the highest use of target date funds in both periods but experienced negligible net change.
- Most consistent 401(k) participants who were fully invested in target date funds at year-end 2016 remained fully invested in target date funds at year-end 2020. Among consistent 401(k) plan participants who were fully invested in target date funds at year-end 2016, more than three-quarters remained fully invested in target date funds at year-end 2020. This high level of persistence in target date fund investing was observed across all participant age groups.