The asset allocations of 401(k) retirement plan savers in their 20s at the end of 2015 differed significantly from the allocations of 401(k) participants in their 20s in the mid-1990s, according to a new study.

The Investment Company Institute (ICI) and the Employee Benefit Research Institute (EBRI) released “401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2015,” which is an update of the original 1999 joint study that analyzed 1996 data.

The new study draws on 20 years of data analyzed in the EBRI/ICI series of annual studies on 401(k) participants’ activities, which allows for a cross-generational comparison of 401(k) investors in their 20s. 

According to Sarah Holden, ICI’s senior director of retirement and investor research, “The data show that 401(k) plan investors in their 20s — whether the millennials of 2015 or the Generation Xers of 1996 — have invested a large portion of their accounts in equities, but the composition of these equity investments has changed.”

At the end of 2015, 401(k) plan participants in their 20s held 80% of their aggregate assets in equities, which is little changed from the 77% share for their counterparts in 1996, according to the study.

Compared with their counterparts 20 years ago, the millennial 401(k) investors were less concentrated in equity funds and company stock and more concentrated in balanced funds (which include target date funds).

“One factor influencing this trend is that today’s younger investors are relying more on the automatic rebalancing feature of target date funds to keep their assets allocated in an age-appropriate way as they progress through their careers,” Holden said in a statement.

Savers in their 20s allocated 28% of their aggregate assets to equity funds at year-end 2015 — about half of the 55% share allocated by that age cohort in 1996, according to the study. Similarly, the share of assets that these younger 401(k) participants have allocated to company stock has fallen, from 17% in 1996 to 5% at year-end 2015.

Rather, the study finds that the younger generation of 401(k) participants have invested their assets much more heavily in TDFs and other balanced funds.

At year-end 2015, 54% of assets for participants in their 20s were invested in balanced funds, and much of that (47%) in target date funds. In 1996, participants in their 20s allocated only 8% of their 401(k) plan assets to balanced funds.

The study notes that target date funds were not reported separately in the database before 2006, when they were approved as a qualified default investment alternative by the Pension Protection Act.

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