The big news in 2013 was that it was the first year more assets came out of 401(k)s than went in, signaling the start of the widely anticipated demographic sea change.
What happened in 2014 (the most recent full-year for complete data)? While nothing quite as dramatic, the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI) released its annual list of 401(k) fun facts in April. Some were expected; others, not so much. Among the findings reported by Jack VanDerhei and his team:
- The bulk of 401(k) assets were invested in stocks. On average, at year-end 2014, 66 percent of 401(k) participants’ assets were invested in equity securities through equity funds, the equity portion of balanced funds, and company stock.
- 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 percent 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 70 percent of 401(k) plans included target-date funds in their investment lineup at yearend 2014. At year-end 2014, 18 percent of the assets in the EBRI/ICI 401(k) database were invested in target-date funds and 48 percent of 401(k) participants in the database held target-date funds.
- 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.
- 401(k) participants’ investments in company stock continued at historically low levels. Only 7 percent of 401(k) assets were invested in company stock at year-end 2014, the same share as in 2012 and 2013.
- 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 percent of all 401(k) participants who were eligible for loans had loans outstanding against their 401(k) plan accounts, down from 21 percent at year-end 2013, although up from 18 percent at year-end 2008.
- The year-end 2014 average 401(k) plan account balance in the database was 5.4 percent higher than the year before, but may not accurately 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.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
