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May 03, 2016 at 02:17 PM
An April Issue Brief from EBRI provided a look at 401(k) trends in 2014 and found that participants are heavily invested in equities. In fact, 401(k) participants at year-end 2014 had more invested in equities than before the financial crisis at the end of 2007.
Two-thirds of 401(k) assets are invested in equity securities, including equity funds, the equity portion of balanced funds and company stocks, and over 90% of plan participants have at least some investment in equities, according to the report. The report found that even though they weren’t invested directly in an equity fund, 83% of participants still had equity exposure through company stock or balanced funds.
“The bulk of 401(k) assets continued to be invested in equities at year-end 2014,” Jack VanDerhei, EBRI research director and co-author of the report, said in a statement. “This is driven in part by younger plan participants, who have higher concentrations in equities. Participants in their 60s remain focused on growth as well, however, allocating 56% of 401(k) plan assets to equity investments.”
Target-date funds were a popular vehicle for participants, particularly younger ones. Almost half of participants, accounting for 18% of assets, were invested in target-date funds, according to the report. Among participants in their 20s, more than 40% of their 401(k) assets were invested in a TDF, compared with 16% of assets owned by participants in their 60s.
“Target-date funds are a popular, convenient investment choice for savers looking for professional asset allocation, portfolio diversification and automatic rebalancing over time,” said Sarah Holden, ICI senior director of retirement and investor research and co-author of the report. “More than 70% of 401(k) plans included target-date funds in their investment lineup in 2014, and recently hired workers, in particular, often invest in these diversified funds.”
The report found two-thirds of recently hired participants were invested in some kind of balanced fund, including target-date funds. Forty-two percent of recently hired workers’ plan assets were invested in a balanced fund, including 35% in TDFs. The report didn’t include data on how many plans with automatic enrollment used a target-date fund as its default investment.
