How Do 401(k) Participants Invest?
A joint study of 2014 investment strategies by Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI) reveals interesting information on differences between age groups as well as recently hired versus long-term participants. The study is based on the EBRI/ICI database of employer-sponsored plans including about 24.9 million participants in over 81,000 plans holding $1.9 trillion in assets, and covering 45% of the world of 401(k) participants.
Target-date Funds (TDFs)
- 59% of employees hired within two or less years and 48% of overall 401(k) participants held TDFs, with younger participants more likely than older ones to hold these.
- 60% of the participants were in their 20’s, versus 41% in their 60’s.
- 70% of 401(k) plans included TDF’s in their offerings in 2014 with 65% of the participants opting to use them, according the Sarah Holden, ICI, Senior Director of Retirement and Investor Research. She also stated that this type of investment is “… a popular, convenient investment choice for savers looking for professional asset allocation, portfolio diversification, and automatic re-balancing over time.”
- Roughly 60% of 401(k) assets continue to be invested in equity funds and company stock, with company stocks at historically low levels (7%). In 1999, company stock accounted for 19% of assets.
- 27% of assets were in fixed-income securities such as stable value investments, and bond and money funds
- According to Jack VanDerhei, EBRI Research Director, “The bulk of 401(k) assets continued to be invested in equities at year-end 2014…being driven in part by younger plan participants, who have higher concentrations in equities. Participants in their sixties remain focused on growth as well, however, allocating 56%...to equity investments.”
- 75% of participants in their 20s, and 22% of those in their 60s had 80% of their account balances invested in equities.
- 8% of the 20s group and 12% of the 60s participants had no equities. Other discoveries showed that slightly fewer participants had outstanding loans in 2014 than in 2013 (20% vs. 21%). Not surprisingly, average account balances increased with both age and years of service – participants in their 30s with between two and five years’ tenure averaged balances near $25,000; participants in their 60s with over 30 years of service averaged balances near $275,000. You can see the full results of this annual update posted on these organization’s websites: www.ebri.org and www.ici.org. The above report comes from Asset International, Inc.
Should you have any questions, please feel free to contact your QBI Consultant to go over your plan's loan and hardship procedures. QBI maintains all necessary documents which are accessible to you on demand.