EBRI: 401(k) Balances Grow at an Average Annual Rate of 7.2 percent Over Five-Year Period

Participants endorse balance and diversification, when given such choices in an employer-sponsored retirement plans.

By CYRIL TUOHY, managing editor of Risk & Insurance®

Despite the market turmoil of the past two years, many workers continue to put their long-term retirement savings in diversified stock funds, according to the latest survey results released by the Employee Benefits Research Institute.

Statesman or Spoilsport? (07/24/12)
Risk Confessions (06/01/12)
Devouring a Plateful of Data (08/15/11)
Splitting Silos (10/11/12)
Giving Peace of Mind (08/22/12)

The average 401(k) account balance grew at an average annual rate of 7.2 percent in the five-year period from 2003 to 2008, reaching $86,513 at the end of last year, according to the survey.

This year's survey was compiled by Jack VanDerhei, director of research for EBRI; Luis Alonso, director of information technology and research databases for EBRI; and Sarah Holden, senior director of retirement and investor research for the Investment Company Institute, which represents the mutual fund industry.

The survey results, released annually by EBRI, are included in a 68-page report titled "401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2008." The results are derived from a database containing as many as 24 million 401(k) plan participants in 54,765 employer-sponsored 401(k) plans holding more than $1 trillion in assets.

The survey also found the following:

At the end of last year, 56 percent of 401(k) participants' assets were invested in stocks through equity securities, the equity portion of balanced funds and company stock, the survey found.

Approximately 75 percent of 401(k) plans included lifecycle funds in their investment lineup at year-end 2008, with nearly 7 percent of the assets invested in lifecycle funds and 31 percent of 401(k) participants holding lifecycle funds, the survey also found.

At the end of last year, 36 percent of the account balances of newly hired participants in their 20s were invested in balanced funds, compared with 28 percent in 2007, and about 7 percent in 1998. At year-end 2008, almost 23 percent of the account balances of recently hired participants in their 20s were invested in lifecycle funds, compared with almost 19 percent at the end of 2007.

The share of 401(K) accounts invested in company stock continued to shrink, falling by nearly 1 percentage point to 9.7 percent in 2008.

In 2008, a total of 18 percent of all 401(k) participants eligible for loans had a loan outstanding against their 401(k) accounts, the same percentage as at year-end 2007 and year-end 2006.

In 2008, as many as 49.8 million American workers were active 401(k) plan participants. By the end of last year, 401(k) plan assets had grown to represent 16 percent of all retirement assets, which amounted to $2.3 trillion, according to EBRI.

October 19, 2009

Newsletter Sign-up