Equity Allocations in 401(k) Plans Exceed Pre-Financial Crisis Levels

Ninety-one percent of workers had exposure to equities, compared to 87% in 2007. Furthermore, equities accounted for more than 80% of portfolio allocations for 48% of plan participants.

Exposure to stocks among 401(k) participants exceeded pre-financial crisis levels at the end of 2015 (the most recent year data is available for). Ninety-one percent of workers had exposure to equities, compared to 87% in 2007. Furthermore, equities accounted for more than 80% of portfolio allocations for 48% of plan participants. In comparison, 44% of plan participants had equity allocations in excess of 80% at year-end 2007.

Stock funds comprised 43% of account balances in 2015. The allocation to equity funds was highest among workers in their 40s (48.1%) and 50s (43.9%).

Participants in their 20s were more likely to use target date funds (46.6%) and other balanced funds (7.5%). Overall, target date funds are included in 65% of 401(k) plans. They are commonly the default option in plans with an auto-allocation feature. As such, it is not surprising to see that 67% of workers who were offered target date funds allocate to them. Workers in their 60s had the largest allocations to bond funds (10.1%), money funds (5.7%) and guaranteed investment contracts/stable value funds (9.8%). These allocations are to be expected, given the participants’ proximity to retirement.

Participants’ account balances averaged $73,357 in 2015, slightly down from 2014. The median balance was $16,732, the lowest since at least 2012. The decline in the average balance is attributed to workers and plans entering and leaving an Employee Benefit Research Institute (EBRI)/Investment Company Institute (ICI) database. The average account balance among workers who were in the database during both 2014 and 2015 rose 3.1% to $85,729.

Behind the numbers is a wide variance in account balances. At the lower end, 41.3% of plan participants had account balances of less than $10,000. At the higher end, 19.3% of workers had balances in excess of $100,000. Age, tenure and salary all have a significant influence on the size of an individual’s account.

The database used for this analysis is a collaboration between the EBRI and the ICI. The database covers nearly half of all 401(k) plan participants and 43% of 401(k) plan assets.

Source: “401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2015,” Jack VanDerhei, Sarah Holden, Luis Alonso and Steven Bass, EBRI Issue Brief, August 3, 2017.