The bulk of 401(k) assets were invested in stocks. On average, at year-end 2015, 66 percent of 401(k) participants’ assets were invested in equity securities through equity funds, the equity portion of balanced funds, and company stock. Twenty-seven percent was in fixed-income securities such as stable-value investments, bond funds, and money funds.
More 401(k) plan participants held equities at year-end 2015 than before the financial market crisis (year-end 2007), and most had the majority of their accounts invested in equities. For example, about three-quarters of participants in their 20s had more than 80 percent of their 401(k) plan accounts invested in equities at year-end 2015, up from less than half of participants in their 20s at year-end 2007. Overall, more than 90 percent of 401(k) participants had at least some investment in equities at year-end 2015.
Nearly 65 percent of 401(k) plans, covering nearly three-quarters of 401(k) plan participants, included target-date funds in their investment lineup at year-end 2015. At year-end 2015, 20 percent of the assets in the EBRI/ICI 401(k) database were invested in target-date funds and about half 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.
A majority of new or recent hires invested their 401(k) assets in balanced funds, including target-date funds. For example, at year-end 2015, 70 percent of recently hired participants held balanced funds in their 401(k) plan accounts. Balanced funds comprised 41 percent of the account balances of recently hired 401(k) participants at year-end 2015. A significant subset of that balanced fund category is invested in target-date funds. At year-end 2015, 34 percent of the account balances of recently hired participants were invested in target-date funds.
401(k) participants’ investment in company stock continued at historically low levels. Less than 7 percent of 401(k) assets were invested in company stock at year-end 2015, roughly the same share as in 2012, 2013, and 2014. This share has fallen by 66 percent since 1999 when company stock accounted for 19 percent of assets. Recently hired 401(k) participants contributed to this trend: they tend to be less likely to hold company stock. At year-end 2015, about one-quarter of recently hired 401(k) plan participants in plans offering company stock held company stock, compared with about 43 percent of all 401(k) participants.
401(k) participants were less likely to have loans outstanding at year-end 2015 than at year-end 2014. At year-end 2015, 18 percent of all 401(k) participants who were eligible for loans had loans outstanding against their 401(k) plan accounts, down from 20 percent at year-end 2014. Loans outstanding amounted to 12 percent of the remaining account balance, on average, at year-end 2015, up 1 percentage point from year-end 2014. Loan amounts also edged up a bit in 2015.
The year-end 2015 average 401(k) plan account balance in the database was 3.8 percent lower than the year before, reflecting in large part the changing composition of the sample rather than the experience of typical 401(k) participants in 2015. To understand changes in 401(k) participants’ average account balances, it is important to analyze a sample of consistent participants. For 401(k) participants present in both 2014 and 2015, the average account balance increased by 3.1 percent. As with previous EBRI/ICI updates, analysis of a sample of consistent 401(k) plan participants is expected to be published later this year.
The average 401(k) plan account balance tends to increase with participant age and tenure. For example, at year-end 2015, participants in their 40s with more than two to five years of tenure had an average 401(k) plan account balance of about $35,000, compared with an average 401(k) plan account balance of more than $280,000 among participants in their 60s with more than 30 years of tenure.