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Retirement Planning > Saving for Retirement > 401(k) Plans

Self-Directed 401(k)s Up 13% in Q4: Schwab

By Michael S. Fischer

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What You Need to Know

  • Participants remained resilient last year in the face of volatility and early market lows.
  • Information technology was the biggest sector in equities investments in the fourth quarter.
  • Advised accounts held higher average account balances than non-advised accounts in Q4.

Charles Schwab reported Tuesday that retirement plan participant account balances in self-directed brokerage accounts averaged $331,664 at the end of the fourth quarter, up 13% year over year and up 10% from the third quarter.

Baby boomers had the highest SDBA balances at an average of $493,129. Generation Xers had an average balance of $282,494, and millennials $94,872. 

The report also showed that participants remained resilient as they faced volatility and market lows early in 2020, driven by the pandemic. Average account balances finished the year up 31%, compared with the lows they experienced at the end of the first quarter.

Equities held 35% of participants’ assets, up from 29% in the fourth quarter of 2019. Mutual funds were the second largest holding at 31%, followed by ETFs at 18%, cash at 14% and fixed income at 2%. 

For its fourth-quarter report, Schwab collected data from some 161,000 retirement plan participants who have balances between $5,000 and $10 million in their Schwab Personal Choice Retirement Accounts.

SDBA participants can use their brokerage accounts to invest retirement savings in individual stocks and bonds, as well as ETFs, mutual funds and other securities that are not part of their retirement plan’s core investment offerings. 

Allocation Trends 

In the equities investment category, information technology was the biggest sector holding at 30%, down 1 percentage point from the third quarter. 

Apple accounted for 12% of portfolios’ equity allocation. Tesla made up 7%, Amazon 6%, Microsoft 3% and Berkshire Hathaway 1%.

Within mutual funds, allocations remained consistent throughout the year, the report said. Large-cap funds had the largest allocation at 32%, taxable bond funds 20% and international funds 16%.

Among ETFs, investors allocated 49% to U.S. equity, 15% to U.S. fixed income, 13% to sector funds and 12% to international equity.

Other Findings 

According to the report, advised accounts held higher average account balances than non-advised accounts in the fourth quarter: $517,849 vs. $288,513. 

Participants held an average of 11.4 positions in their SDBAs at the end of the last quarter, compared with 10.8 positions in the third quarter and 10.1 positions in the year-earlier fourth quarter. By generation, baby boomers held 12.8 positions in their SDBA, Gen Xers 11.5 and millennials 8.8. 

Schwab’s analysis found that trading volumes were mostly unchanged from the previous quarter, at an average of 13.9 trades per account. Participants made the most trades in their equity holdings, followed by ETFs and mutual funds. 

Gen Xers made up about 44% of SDBA participants, boomers 34% and millennials 16%. Gen Xers also had the most advised accounts at 47%, followed by boomers at 38% and millennials at 12%. 

(Image: Shuttershock)

Michael S. Fischer

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