Sixty-six percent of 401(k) assets were invested in stocks at year-end in 2014, according to a report by the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI). Participants’ assets were invested in equity securities through equity funds, the equity portion of balanced funds, and company stock. Twenty-seven percent of assets were in fixed-income securities, such as stable-value investments, bond funds, and money funds. The reports also reveals the following:
- More 401(k) plan participants held equities at year-end 2014 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% of their 401(k) plan accounts invested in equities at year-end 2014, up from less than half of participants in their 20s at year-end 2007. More than 90% of 401(k) participants had at least some investment in equities at year-end 2014.
- More than 70% of 401(k) plans included target-date funds in their investment lineup at year end 2014. At year-end 2014, 18% of the assets were invested in target-date funds, and 48% of 401(k) participants in the database held target-date funds. Also known as life cycle funds, these funds are designed to offer a diversified portfolio that automatically re-balances 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 2014, two-thirds of recently hired participants held balanced funds in their 401(k) plan accounts. Balanced funds comprised 42% of the account balances of recently hired 401(k) plan participants. A significant subset of that balanced fund category is invested in target-date funds. Thirty-five percent of the account balances of recently hired participants were invested in target-date funds.
- 401(k) participants’ investments in company stock continued at historically low levels. Only 7% of 401(k) assets were invested in company stock at year-end 2014, the same share as in 2012 and 2013. This share has fallen by 63% since 1999 when company stock accounted for 19% of assets. Recently hired 401(k) participants are less likely to hold company stock. At year-end 2014, less than 30% of recently hired 401(k) plan participants in plans offering company stock held company stock, compared to about 44% of all 401(k) participants.
- 401(k) participants were less slightly likely to have loans outstanding at year-end 2014 than at year-end 2013. At year-end 2014, 20% of all 401(k) participants who were eligible for loans had loans outstanding against their 401(k) plan accounts, down from 21% at year-end 2013, although up from 18% at year-end 2008. Loans outstanding amounted to 11% of the remaining account balance, on average, at year-end 2014, down 1% from year-end 2013. Nevertheless, loan amounts edged up a bit in 2014.
- The year-end 2014 average 401(k) plan account balance in the database was 5.4% higher than the year before, but may not reflect the experience of typical 401(k) participants in 2014.
- The average 401(k) plan account balance tends to increase with participant age and tenure. For example, participants in their 30s with more than two to five years of tenure had an average 401(k) plan account balance of close to $25,000, compared to an average 401(k) plan account balance of nearly $275,000 among participants in their 60s with more than 30 years of tenure.