Frequently Asked Questions About 401(k) Plans

How large are 401(k)s?

As of September 30, 2012, 401(k) plans held an estimated $3.5 trillion in assets and represented approximately 18 percent of the $19.4 trillion U.S. retirement market, which includes employer-sponsored retirement plans, individual retirement accounts (IRAs), and annuities. In comparison, 401(k) assets were $1.6 trillion and represented nearly 15 percent of the U.S. retirement market in 2002.

How many Americans have 401(k)s?

In 2011, 51 million American workers were active 401(k) participants.

401(k) Plan Assets
Billions of dollars, end-of-period, selected periods

Note: Components may not add the total because of rounding.
Sources: Investment Company Institute, Federal Reserve Board, and Department of Labor

How did 401(k) participants react to the market volatility of 2008, and how have 401(k)s performed since then?

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. These activities have become less prevalent since 2008. For example, in 2011, 2.7 percent of participants stopped contributing, 10.5 percent changed the asset allocation of their account balances, and 7.1 percent changed the asset allocation on new contributions.

401(k) assets have risen 63 percent from March 31, 2009 to September 30, 2012, due to market gains and new contributions.

Where do 401(k) participants invest their money?

About 60 percent of 401(k) plan assets were held in mutual funds as of September 30, 2012. 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 (IRAs and defined contribution plan accounts, including 401(k) plans) stood at $5.3 trillion as of September 30, 2012, or 41 percent of overall mutual fund assets. Fund assets in 401(k) plans stood at $2.1 trillion, or 17 percent of total mutual fund assets as of September 30, 2012.

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

The average account balance (net of plan loans) was $58,991 at year-end 2011, 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?

On average, participants had 61 percent of their 401(k) plan balances invested directly or indirectly in equity securities at year-end 2011. That consisted of equity funds, including mutual funds and other pooled investments (39 percent of plan balances), employer’s company stock (8 percent), and the equity portion of balanced funds (14 percent). Twelve percent of plan balances was invested in bond funds, 4 percent in money market funds, 11 percent in guaranteed investment contracts (GICs) and other stable value funds, and the fixed income portion of balanced funds (7 percent).

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 invest more in equities and older participants tend to invest more in fixed-income securities such as bond funds, money market funds, stable value funds, GICs, and the fixed-income portion of balanced funds. At year-end 2011, participants in their twenties had 74 percent of their 401(k) assets invested in equities while participants in their sixties had 48 percent of their 401(k) assets invested in equities.

How many participants borrow against their 401(k)s?

Most 401(k) plan participants do not borrow against their balances. While 59 percent of participants were in 401(k) plans that offer loans at year-end 2011, 21 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 2011, the average unpaid loan balance was $7,027. This represents about 14 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 (26 percent) and thirties (21 percent) and lower for participants in their fifties (11 percent) and sixties (9 percent).

Additional 401(k) Resources

Please visit our 401(k) resource center and our defined contribution plan publication page.

February 2013