Summary
Key Findings:
- 401(k) plans draw in many young retirement savers and new hires. At year-end 2022, 40 percent of 401(k) plan participants were in their twenties or thirties, and 23 percent were in their forties. Forty-eight percent of 401(k) plan participants had five or fewer years of tenure, including nearly one-quarter who were recent hires (two or fewer years of tenure).
- Younger 401(k) plan participants tend to be invested more in equities than older 401(k) plan participants. On average, at year-end 2022, 71 percent of 401(k) participants’ assets were invested in equity securities through equity funds, the equity portion of balanced funds, and company stock. Younger participants, as a group, had nearly 90 percent of their 401(k) plan assets invested in equities, compared with 57 percent of 401(k) plan assets among participants in their sixties.
- Ownership of investments in equities is widespread among 401(k) plan participants. Overall, 97 percent of 401(k) participants had at least some investment in equities at year-end 2022.
- More 401(k) plan participants held equities at year-end 2022 than before the financial market crisis (year-end 2007), and most had the majority of their accounts invested in equities. For example, more than 90 percent of participants in their twenties had more than 80 percent of their 401(k) plan accounts invested in equities at year-end 2022, up from less than half of participants in their twenties at year-end 2007.
- Target date funds continue to be an often-used investment option among 401(k) plan participants. At year-end 2022, 85 percent of 401(k) plans, covering 88 percent of 401(k) plan participants, included target date funds in their investment lineup. Target date funds were 38 percent of the assets in the EBRI/ICI 401(k) database, and 68 percent of 401(k) participants in the database held target date funds. Also known as lifecycle funds, these funds are designed to offer a diversified portfolio that automatically rebalances to be more focused on income over time.
- 401(k) plan loans are widely available, but a small share take them. At year-end 2022, 84 percent of 401(k) plan participants were in plans allowing loans, but only 15 percent of 401(k) participants who were eligible for loans had loans outstanding against their 401(k) plan accounts. Loans outstanding amounted to 10 percent of the remaining account balance, on average, at year-end 2022, in line with recent history.
- The average 401(k) plan account balance tends to increase with participant age and tenure. For example, at year-end 2022, participants in their forties with more than two to five years of tenure had an average 401(k) plan account balance of about $38,000, compared with an average 401(k) plan account balance of about $312,000 among participants in their sixties with more than 30 years of tenure.