This Issue Brief provides an update on 401(k) plan participants' asset allocations, account balances, and loan activity as of year-end 2003, as measured by the collaborative EBRI/ICI Participant-Directed Retirement Plan database—the world's largest repository of information about individual 401(k) plan participant accounts.
This update tracks the account balances of a large and representative sample of 401(k) plan participants through the severe bear market that caused broad stock market indexes to decline about 40 percent between year-end 1999 and early 2003 and the rebound that increased broad equity index values by 34 percent over the last 10 months of 2003.
By year-end 2003, 401(k) plan assets had grown to $1.9 trillion and an estimated 42 million workers in the United States participated in these plans. The portion of 401(k) balances invested in equities increased in 2003, reflecting the strength of equity prices. Beyond the market-driven changes, 401(k) plan participants do not appear to have made significant asset reallocations or to have made changes in their loan activity. Participants' allocations to company stock remained in line with previous years.
The average account balance among participants who consistently held accounts since 1999 increased 29.1 percent in 2003 and 17.1 percent altogether since 1999. While average account balances increased in 2003 across all participant age and tenure groups, balances for some older participants had not yet recovered from the impact of the three-year bear market in equities. For example, for participants in their 50s with more than 30 years of job tenure (who had an account since 1999), the average account balance was still down 9.3 percent at year-end 2003 compared with year-end 1999.
On average, at year-end 2003, 45 percent of 401(k) plan participants' assets were invested in equity funds, 16 percent in company stock, 9 percent in balanced funds, 10 percent in bond funds, 13 percent in guaranteed investment contracts (GICs) and other stable value funds, and 5 percent in money funds.
Loan activity among 401(k) plan participants in 2003 was essentially unchanged from earlier years. Eighteen percent of eligible participants had loans outstanding at the end of 2003 and only 12 percent of participants with account balances of less than $10,000 had loans outstanding. Among participants with loans outstanding at the end of 2003, the level of the unpaid balance represented 13 percent of the account balance, net of the unpaid loan balance, down slightly from recent years.