EBRI Issue Brief
401(k) Plan Asset Allocation, Account Balances, and Loan Activity
- The Employee Benefit Research Institute
(EBRI) and the Investment Company Institute (ICI) have been
collaborating for the past two years to collect data on
participants in 401(k) plans. This effort, known as the EBRI/ICI
Participant-Directed Retirement Plan Data Collection Project, has
obtained data for 401(k) plan participants from certain of EBRI
and ICI sponsors and members serving as plan recordkeepers and
- The report includes 1996 information on
6.6 million active participants in 27,762 plans holding nearly
$246 billion in assets. The data include demographic information,
annual contributions, plan balances, asset allocation, and loans,
and are currently the most comprehensive source of information on
individual plan participants. In 1996, the first year for which
data are ready for analysis, the EBRI/ICI database appears to be
broadly representative of the universe of 401(k) plans. Key
- For all participants, 44.0
percent of the total plan balance is invested in equity funds,
19.1 percent in employer 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, 0.8 percent in
other stable value funds, and 1.0 percent in other or
unidentified investments. This allocation implies that over
two-thirds of plan balances are invested directly or indirectly
in equity securities.
- Asset allocation varies with age.
For instance, on average, individuals in their twenties invested
76.8 percent of assets in equities and only 22.1 percent in
fixed-income investments. By comparison, individuals in their
sixties invested 53.2 percent of their assets in equities and
45.9 percent of assets in fixed-income investments.
- Investment options offered by
401(k) plans appear to influence asset allocation. For example,
the addition of company stock substantially reduces the
allocation to equity funds and the addition of GICs lowers
allocations to bond and money funds.
- Employer contributions in the
form of company stock affect participant allocation behavior.
Participants in plans in which employer contributions are made in
company stock appear to decrease allocations to equity funds and
to increase the allocation of company stock in self-directed
- The average account balance (net
of plan loans) for all participants is $37,323. The balances,
however, represent only amounts with current employers and do not
include amounts remaining in the plans of prior employers. Nor do
the balances indicate what savings would be in a
“mature” 401(k) plan program.
- The average balances of older
workers with long tenure at one employer indicate that a mature
401(k) plan program will produce substantial account balances.
For example, individuals in their sixties with at least 30 years
of tenure have average account balances in excess of $156,000;
those in their fifties have balances in excess of $117,000.