Print this Page

Frequently Asked Questions About 401(k) Plans

How large are 401(k)s?

At year-end 2008, 401(k) plans held an estimated $2.4 trillion in assets and represented approximately 17 percent of the $14 trillion U.S. retirement market. In comparison, 401(k) assets were $385 billion and represented 10 percent of the U.S. retirement market in 1990.

How many Americans have 401(k)s?

In 2008, 49.8 million American workers were active 401(k) participants.

401(k) Plan Assets
Billions of dollars

How did 401(k) participants react to the market volatility of 2008?

An examination of account records of 22 million defined contribution participants found that in 2008 only 3.7 percent of participants stopped contributing to their accounts. In addition, most participants maintained their asset allocations, with 14.4 percent changing the asset allocation of their account balances and 12.4 percent changing their contribution mix.

Where do 401(k) participants invest their money?

About 47 percent of 401(k) plan assets were held in mutual funds at year-end 2008. Other institutions, such as insurance companies and banks, held the remaining 401(k) plan assets.

What role do retirement account investments play in the mutual fund industry?

Mutual fund assets held in retirement accounts (defined contribution plan accounts and IRAs) stood at $3.1 trillion at the end of 2008, or 33 percent of overall mutual fund assets. Fund assets in 401(k) plans stood at $1.1 trillion, or 11 percent of total mutual fund assets at year-end 2008.

What is the average 401(k) plan account balance?

The average account balance (net of plan loans) was $64,454 at year-end 2007, according to research released as part of the Employee Benefit Research Institute (EBRI) and ICI Participant-Directed Retirement Plan Data Collection Project, the largest database on participants in 401(k) plans.

How have 401(k) participants allocated their investments?

Participants, on average, had about 68 percent of their 401(k) plan balances invested directly or indirectly in equity securities—the sum of equity funds, company stock, and the equity portion of balanced funds. At year-end 2007, 48 percent of plan balances were invested in equity funds (which include mutual funds and other pooled investments), 11 percent in company stock, and 15 percent in balanced funds. Eleven percent of plan balances were invested in guaranteed investment contracts (GICs) and other stable value funds, 8 percent in bond funds, and 4 percent in money funds.

Does age affect a participant’s asset allocation?

The asset allocation of participant account balances varies considerably with the age of the 401(k) participant. Younger participants tend to concentrate their assets in equity funds, while older participants tend to invest more in fixed-income securities, such as GICs and bond funds. At year-end 2007, participants in their twenties had invested nearly half of their account balances in equity funds, while those in their sixties held nearly 39 percent in equity funds.

What role does borrowing play in 401(k) plan investing?

Most 401(k) plan participants do not borrow against their balances. While 90 percent of participants were in 401(k) plans that offered loans at year-end 2007, only 18 percent of those eligible for loans had loans outstanding.

What is the average outstanding loan balance through 401(k) plans?

For those with outstanding loans at the end of 2007, the average unpaid loan balance was $7,495. This represents about 12 percent of the participant’s remaining account balance. Loan ratios (outstanding loan balance as a percentage of the remaining account balance) were higher for participants in their twenties (25 percent) and thirties (19 percent) and lower for participants in their fifties (10 percent) and sixties (8 percent).