Asset Allocation Stays Static

The data show that, in terms of asset allocation:

• a little over half of plan balances are invested in equity funds,
• almost 20% is invested in company stock,
• only 8% is invested in balanced funds,
• while only 5% is invested in bond funds, and
• the remaining 15% is in stable-value investments such as money funds or guaranteed investment contracts

Average Balance

The average plan balance, net of plan loans, for all participants at the close of 2000 was $49,024, some 12% lower than the previous year.

However, the average account balance of the 8.3 million participants in the database who held accounts in both 1999 and 2000 fell by only 0.1% in 2000, influenced by:

• new contributions by the participant and the employer
• total investment return on account balances,
• withdrawals, borrowing, and loan repayments

Old Money

According to the data, the average account balance varied considerably with age. Since account balances are smaller for younger participants, contributions make a greater impact. For older participants, investment return is of greater importance because their account balances tend to be large relative to their annual contributions.

• the average account balance of twenty-something participants rose 26.9% in 2000,
• while for those aged sixty-plus, it fell by 5.8%

Analysis of the data also shows no change in 401(k) plan participant loan activity in 2000, despite financial market volatility. Those with balances of less than $10,000 were primarily younger workers with short tenures, while those with balances in excess of $100,000 were older workers with long tenures. In fact:

• almost 45% of participants have account balances of less than $10,000 in the 401(k) plan at the participant’s current employer,
• while 13% have balances greater than $100,000

Despite the volatility in financial markets, there was virtually no change in loan behavior of 401(k) plan participants in 2000.

Only 18% of eligible participants had outstanding loans at the end of 2000. For those, the amount of the unpaid balance represented 14% of the account balance, net of the unpaid loan balance.

The EBRI/ICI database comprises information from a variety of plan record keepers and administrators and covers all size plans. It includes data on 11.8 million active 401(k) plan participants in 35,367 plans with $579.8 billion in assets.

The 2000 database accounts for 11% of all 401(k) plans, 28% of all 401(k) participants, and about 33% of the assets held in 401(k) plans.