401(k) Balances Up 18%, But Gaps Remain

February 8, 2001 (PLANSPONSOR.com) - The average 401(k) account balance rose 18% in 1999, buoyed by both contributions and the stock market - but significant gaps remain between "average" and reality for some, according to data from the Employee Benefit Research Institute (EBRI) and the Investment Company Institute.

The EBRI/ICI database found that while the average balance at year-end 1999 was $55,502 (net of plan loans) on average, nearly half (42%) of participants had account balances less than $10,000.  In fact, the median (mid-point) balance among active participants was $15,246, which was 17% higher than year-end 1998.

Roughly 15% had account balances greater than $100,000.

Asset Allocation

The data also found that nearly three-fourths of plan balances are invested directly or indirectly in stocks.  Participants are invested:

  • 53% are in equity funds
  • 19% are in company stock
  • 10% are in guaranteed investment contracts (GICs)
  • 7% are in balanced funds
  • 5% are in bond funds
  • 4% are in money market funds
  • 1% are in “other” stable value funds

Participants in plans not offering GICs or company stock tend to have the highest allocations to equity funds, while participants in plans offering GICs but not company stock have lower allocations to bond, money, and equity funds. 

Plans offering company stock (but not GICs) have substantially lower allocations to all other options, according to the study.

Age Stages
Not surprisingly, younger participants tend to concentrate in equity funds (63% of assets belonging to those in their twenties), while “older” participants gravitate toward fixed income securities (those in their sixties had “just” 44% in stocks). 

On the other hand, younger, less tenured workers tended to have account balances with less than $10,000.  Older workers with longer work (and savings) histories tended to have balances larger than $100,000.

Workers in their sixties, with at least 30 years on the job had an average 401(k) balance of $198,595, compared with an average balance of $96,250 for forty-somethings with 20 years of service.

Loan Ranges

Only 18% of eligible participants had loans outstanding at the end of 1999, while those with an outstanding balance had 14% of their net balance so encumbered.  Over half (58%) of plans in the database offered participant loans.

The EBRI/ICI Participant-Directed Retirement Plan Data Collection Project captures the experience of 10.3 million active participants in 32,674 plans with $573.4 billion in assets – roughly 11% of all 401(k) plans, 26% of all 401(k) participants, and about a third (35%) of the assets held in 401(k) plans.

You can access the 28-page report at http://www.ici.org/pdf/per07-01.pdf .