EBRI Issue Brief

401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2020

Nov 29, 2022 32  pages


Key Findings:

  • 401(k) plans draw in many young retirement savers and new hires. At year-end 2020, 38 percent of 401(k) plan participants were in their twenties or thirties, and 24 percent were in their forties. Forty-three percent of 401(k) plan participants had five or fewer years of tenure, including nearly one-fifth 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 2020, 69 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 more than 80 percent of their 401(k) plan assets invested in equities, compared with 56 percent of 401(k) plan assets among participants in their sixties.
  • Ownership of investments in equities is widespread among 401(k) plan participants. Overall, 94 percent of 401(k) participants had at least some investment in equities at year-end 2020.

     More 401(k) plan participants held equities at year-end 2020 than before the financial market crisis (year-end 2007), and most had the majority of their accounts invested in equities. For example, nearly 80 percent of participants in their twenties had more than 80 percent of their 401(k) plan accounts invested in equities at year-end 2020, 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 2020, 86 percent of 401(k) plans, covering 87 percent of 401(k) plan participants, included target date funds in their investment lineup. Target date funds were 31 percent of the assets in the EBRI/ICI 401(k) database, and 59 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 rarely taken. At year-end 2020, 84 percent of 401(k) plan participants were in plans allowing loans, but only 16 percent of 401(k) participants who were eligible for loans had loans outstanding against their 401(k) plan accounts, down from year-end 2019. Loans outstanding amounted to 8 percent of the remaining account balance, on average, at year-end 2020, the same as year-end 2019, and well below their historical average. Loan amounts, on average, increased in 2020, but remained small relative to the remaining account balance.
  • The average 401(k) plan account balance tends to increase with participant age and tenure. For example, at year-end 2020, participants in their forties with more than two to five years of tenure had an average 401(k) plan account balance of about $43,000, compared with an average 401(k) plan account balance of more than $350,000 among participants in their sixties with more than 30 years of tenure.