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Facts from EBRI
401(k) Plan Account Balances, Asset Allocation, and Loan Activity
Plan Year 1996
The average account balance (net of plan loans) for all participants in the EBRI/ICI database was $37,323, and the median account balance was $11,600.
The average account balance increases with age and job tenure. The average account balance for a person in his or her 20s who has been at the current job for two years or less was $3,003.74. The average account balance for a person in his or her 60s who has been at the current position for more than 30 years was $156,334.78.
Most 401(k) accounts have low account balances. Forty-seven percent of 401(k) accounts had an account balance of less than $10,000. Twenty-eight percent of accounts had a balance of $10,000 through $40,000. Only 9.8 percent of 401(k) account balances were more than $100,000.
Participants in the 401(k) plans in the 1996 EBRI/ICI database had, on average, 44.0 percent of their plan balance invested in equity funds, 19.1 percent invested in company stock, 15.1 percent in guaranteed investment contracts (GICs), 7.8 percent in balanced funds, 6.8 percent in bond funds, 5.4 percent in money funds, and 0.8 percent in other stable value funds.
Participant asset allocation varies considerably by age. Younger participants tend to invest a greater percentage of account balances in equity funds; older participants are more disposed to invest in GICs. On average, participants in their 20s have 55.1 percent of their account balances in equity funds, compared with 33.9 per-cent for those in their 60s. Participants in their 20s invest 7.8 percent of their account balance in GICs, and those in their 60s invest 26.1 percent.
In plans where employer contributions are required to be invested in company stock, the allocation of assets differs markedly from the allocation of assets in plans where the participant can direct both his or her own and the employer's contribution. In plans where the employer contribution is allocated to employer stock, 54.6 per-cent of total account balances are invested in company stock. When examining only the participant-directed portion of these accounts, 32.7 percent of the participant-directed portion of the accounts is invested in company stock. In contrast, where plans offer a company stock investment option but the employer contribution is not required to be invested in company stock, 19.9 percent of the total account balance of these accounts was invested in company stock.
Of the 27,762 401(k) plans in the EBRI/ICI database, 52 percent offered a plan loan to participants. The loan feature is primarily associated with large plans. In the database, more than 90 percent of the plans with more than 10,000 participants offered borrowing privileges to employees. In contrast, only 43 percent of the plans with 10 or fewer employees had the loan feature.
The concentration of loans in large plans means that most participants in 401(k) plans have borrowing privileges. In the database, 70 percent of participants were in plans offering loans. However, only 18 percent of those eligible for loans had loans outstanding at the end of 1996.
Loan activity varies by age. Individuals in their 40s (22 percent), 30s (20 percent), and 50s (17 percent) were most likely to utilize the loan provision. Twelve percent of participants in their 20s had loans outstanding, and 9 percent of persons in their 60s had loans outstanding.
Loan activity varies by job tenure. Individuals with 1020 years of job tenure were most likely to have a loan outstanding (27 percent), followed by individuals with 2030 years (25 percent). Individuals with 0 to two years of job tenure were least likely to have a loan outstanding, 6 percent.
For those with outstanding loans at the end of 1996, the average level of the unpaid loan was 16 percent of account balances.
This loan ratio decreases with age, dropping from 30.0 percent for participants in their 20s to 9.8 percent for those in their 60s. This loan ratio also decreases with job tenure, dropping from 27.3 percent for individuals with less than two years of tenure to 7.4 percent for those with more than 30 years of job tenure.
For more information, contact Ken McDonnell, (202) 775-6342, or see EBRI's Web site at www.ebri.org.
Source: Jack VanDerhei et al., 401(k) Plan Asset Allocation, Account Balances, and Loan Activity, EBRI Issue Brief no. 205, January 1999.
Data are from the EBRI/ICI Defined Contribution and Participant Behavior Research Project. The Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI) obtained data for 401(k) plan participants from some of their sponsors and members serving as plan record keepers and administrators. The data include demographic information, annual contributions, plan balances, asset allocation, and loans. The report includes 1996 information on 6.6 million active participants in 27,762 plans holding nearly $246 billion in assets, and is by far the most comprehensive source of information on individual plan participants.
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