EBRI Issue Brief

401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2005

Aug 24, 2006 20  pages


• Consistent participation in 401(k) plans helps account balances grow: The average account balance increased 50 percent among 401(k) participants who held accounts from 1999 to 2005, even though one of the worst bear markets for stocks since the Great Depression occurred during that period. Among the group of consistent 401(k) plan participants, the average account rose from $67,785 at year-end 1999 to $102,014 by year-end 2005. The median account balance (or midpoint, with half above and half below) among this consistent group also grew, more than doubling between 1999 and 2005 to $54,591.

• The bulk of 401(k) plan assets remains invested in equity securities: On average, at year-end 2005, about two-thirds of 401(k) participants’ assets are invested in equity securities through equity funds, the equity portion of balanced funds, and company stock. The percentage of assets invested in equities has varied narrowly (62 percent to 77 per-cent) over the past 10 years.

• Lifecycle and lifestyle funds continued to grow in popularity, especially among new hires: Recently hired 401(k) plan participants in their 20s currently hold a higher percentage of their 401(k) accounts in lifestyle, lifecycle, and other balanced funds than did their peers in 1998.

• Company stock as a percentage of 401(k) plan assets continued to fall in 2005: Recently hired 401(k) participants contributed to this trend; they are less likely to hold company stock and tend to hold lower concentrations of their accounts in company stock.

• Most 401(k) participants approaching retirement age do not have a loan from their 401(k) plans outstanding: Ninety percent of 401(k) plan participants in their 60s do not have outstanding loans from their 401(k) plan. Among the 10 percent of participants in their 60s that do have a loan outstanding, the loans are small relative to the participants’ remaining account balances.

• About the EBRI/ICI 401(k) database: The EBRI/ICI Participant-Directed Retirement Plan Data Collection Project is the world’s largest repository of information about individual 401(k) plan participant accounts, and at year-end 2005 includes information for 17.6 million 401(k) plan participants’ accounts in 47,256 plans with more than $1.0 trillion in assets. The 2005 EBRI/ICI database covers approximately 37 percent of the universe of 401(k) plan participants, 11 percent of plans, and 42 percent of 401(k) plan assets.