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Are 401(k) Participants Turning Into Day Traders?

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What You Need to Know

  • Today, 65% of defined contribution plans with more than $1 billion in assets offer access to brokerage accounts.
  • The average age of participants using the brokerage account is higher than average because older participants generally have higher incomes and balances.
  • The analysis shows 401(k) assets are still largely invested for long-term growth, especially among plans that offer default investments and other professionally managed solutions.

While there seem to be more news headlines focused on retail investors day-trading stocks, bonds, cryptocurrencies and other speculative assets, it’s not clear how prominent day trading is in defined contribution (DC) plans today.

In some new research with Zhikun Liu, director of research at Empower Retirement, we tackle this topic with a particular focus on utilization of the self-directed brokerage window.

Surveying roughly 4.5 million participants and 85,000 defined contribution (DC) plans, we find that only about 40% of participants had access to brokerage accounts, and of those, only roughly 1.5% used the feature, which equates to approximately 0.6% of all participants in the survey.  

There is a notable difference in the availability of brokerage accounts by plan size, though. Less than 5% of plans with assets below $10 million offered access to brokerage accounts, while over 65% of plans above $1 billion in assets offered this feature. Interestingly, there isn’t much difference in terms of utilization of the brokerage window among participants when it’s available.  

There are some notable differences in the demographics of participants who are using brokerage windows, which is somewhat counter to the media coverage of day trading (which has increasingly focused on younger investors). In DC plans, income and balance tend to be the predominant indicator of those who are likely to use the brokerage window, and participants skew older.  

More on this topic

An important note about the age difference, though, is that once you control for all the demographics in a regression, age isn’t really economically significant, and it becomes other attributes such as income and balance size that are most closely related to whether someone uses the brokerage account or not. 

In other words, while the average age of participants using the brokerage account is higher than average, the effect has to do with older participants having higher incomes and balances rather than just because they are older.

There was a slight increase in utilization and availability of brokerage windows among DC plans on Empower’s record-keeping platform from 2019 to 2020, suggesting rising interest; but overall assets in brokerage are still very low, coming in at less than 1% of all DC assets.

Overall, our analysis suggests that 401(k) assets are still largely invested for long-term growth, especially among plans that offer default investments and other professionally managed solutions. Recent market volatility and coverage of certain investments, however, may appeal to certain investors.

There are many different views on the efficacy of offering a brokerage window within a DC plan. For plans that offer brokerage windows, it’s important to understand how they tend to be used and to consult your legal counsel to ensure you have a corresponding monitoring process to ensure that feature is being used as intended. 


David Blanchett is managing director and head of retirement research at QMA, the quantitative equity and multi-asset solutions specialist of PGIM. His commentary represents his own views and opinions regarding the economic conditions, asset classes, securities, issuers or financial instruments referenced above and are not necessarily the views of PGIM DC Solutions.