The average 401(k) account balance at the end of 2012 was 8.4 percent higher than the year before, but increased assets weren’t typical for all defined contribution plan participants studied, according to a December 2013 brief by the Employee Benefit Research Institute.
While equity investments through stock mutual funds comprised the bulk of 401(k) assets in the year at 61 percent, the share of company stock in 401(k) accounts continued fall, slipping to 7 percent of the assets monitored by EBRI’s database. In 1999, company stock held by 401(k) plan participants was more than twice that percentage of total holdings.
Another burgeoning retirement savings trend continued in 2012: 72 percent of 401(k) plans offered target-date, or lifecycle, funds and 41 percent of participants in the database studied held such funds. Of the total assets in the EBRI/Investment Company Institute 401(k) database, 15 percent were invested in TDFs. These popular funds are designed to offer a diversified portfolio that automatically rebalances to be more focused on income over time.
Forty-three percent of 401(k) account balances of newly hired participants in their 20s were placed in TDFs, up from 40 percent at the end of 2011.
Although equities holdings dominate 401(k) accounts, 33 percent of assets were invested in fixed income securities such as stable-value, bond and money market funds.
Participants’ plan loan activity remained steady, the brief said, yet loan balances increased slightly in the year. At the end of 2012, 211 percent of 401(k) participants who were eligible for loans had outstanding loans from their 401(k) accounts, unchanged from 2009-2011 but higher than 18 percent in at the end of 2008. Loans outstanding at the close of 2012 equaled 13 percent of remaining account balances, on average, down 1 percentage point from year-end 2011. Loan amounts outstanding increased somewhat from the previous year.
EBRI said in its Issue Brief that “it is important to analyze a sample of consistent participants” (those in the same plan for a number of years) to understand changes in their average account balances, hence the nonprofit research organization’s caution on whether 401(k) participants typically experienced a rise of nearly 10 percent in their account balances in 2012, as balance averages indicated. EBRI said its analysis of a sample of consistent plan participants — in the same plan since 2007 — is expected to be published later in 2014.
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