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

Self-Directed 401(k) Balances Surge in Q2: Schwab

By Michael S. Fischer

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What You Need to Know

  • Accounts grew as stocks continued to recover from the March 2020 selloff and consumer confidence returned to pre-pandemic levels, the report found.
  • Trading volumes mirrored those of a year ago as participants encountered familiar volatility with the rise of the delta variant.
  • Forty-eight percent of Generation X participants' accounts were advised, compared with 36% of baby boomers’ and 13% of millennials'.

Retirement plan participant investment account balances within self-directed brokerage accounts averaged $348,183 across all participant accounts at the end of the second quarter, up 22% year over year and up 4.3% from the first quarter, Charles Schwab reported Tuesday.

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

According to the report, trading volumes were in line with those of one year ago at an average of 14 trades per account, as participants encountered familiar pandemic volatility with the rise of the delta variant of COVID-19. 

Though the volatility was anxiety-inducing, participants’ accounts grew year over year as stocks continued to recover from the March 2020 selloff and consumer confidence surged back to pre-pandemic levels. 

The report said 37% of participant assets were held in equities, 30% in mutual funds, 20% in ETFs, 12% in cash and 1% in fixed income. 

Schwab based its report on data it collected from some 174,000 retirement plan participants who have balances between $5,000 and $10 million in their Schwab Personal Choice Retirement Account. 

Allocation Trends 

Schwab’s second-quarter data showed that large-cap funds accounted for about 34% of mutual fund allocations, followed by 19% to taxable bond funds and 16% to international funds. 

At 29%, information technology was the largest equity sector holding in the second quarter. The top five equity holdings were:

  • Apple: 10.3%. 
  • Tesla: 6.3%.
  • Amazon: 5%.
  • Microsoft: 2.7%.
  • NVIDIA: 1.8%. 

Among ETFs, investors allocated 50% to U.S. equity, followed by 15% to sector ETFs, 13% to international equity and 13% to U.S. fixed income.

Other Report Highlights 

Schwab reported that advised accounts held average account balances of $550,127 in the second quarter, while non-advised ones had average balances of $302,330. 

Forty-eight percent of Generation X participants’ accounts were advised, compared with 36% of baby boomers’ and 13% of millennials’ accounts.

Gen X accounted for 44.5% of SDBA participants, boomers 31.9% and millennials 17.7%. Seventy-seven percent of participants are male.

According to the report, boomers had the highest SDBA balances at an average of $532,338, followed by Gen Xers at $306,489 and millennials at $103,777. All balances were up from the first quarter. 

On average, participants held 12.3 positions in their SDBAs at the end of the second quarter, up slightly from 10.5 last year and consistent with the first quarter. 

Michael S. Fischer

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