How Your 401(k) Investments Stack Up

Here is a peek at how other people your age have allocated their retirement savings

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The bulk of 401(k) assets are invested in stocks. At the end of 2008, 56 percent of 401(k) participants’ savings was invested in the stock market including equity funds, the equity portion of balanced funds, and company stock, according to a new report released yesterday by the Employee Benefit Research Institute (EBRI) and the Investment Company Institute. The hefty concentration of equities played a major role in the 30.5 percent decline in the average 401(k) balance between 2007 and 2008.

Workers in their 30s and 40s experienced the greatest declines in account balances. “Mid-career workers with larger balances suffered larger percentage losses overall last year, because the share of equities in their account allocation was relatively high and their ongoing contributions were small relative to their existing balances,” says Jack VanDerhei, research director for EBRI. Among workers who held 401(k) accounts consistently from 2003 through 2008, participants in their 20s saw their average account balance fall by 18.6 percent in 2008, while those in their 40s saw a 26.4 percent drop.

Younger 401(k) participants generally had higher concentrations of equity in their 401(k) and were more likely to own balanced funds, lifecycle funds, and target-date funds, especially if they were recently hired. Older retirement savers were more likely to invest in more conservative fixed-income securities such as bond funds, money funds, guaranteed investment contracts, and other stable-value funds.

Here is a peek at how other people your age have allocated their 401(k) savings.

  401(k) Asset Allocation by Age

Percent of Account Balance in Each Type of Fund 20s 30s 40s 50s 60s All
Equity funds 38% 47% 44% 35% 28% 37%
Lifecycle, target-date funds 15 9 7 6 6 7
Balanced funds 13 9 8 8 8 8
Bond funds 9 10 11 13 15 12
Money funds 6 5 6 7 9 7
Guaranteed investment contracts, stable-value funds 8 7 10 16 23 15
Company stock 8 9 10 11 8 10
Other 1 2 2 3 3 2
Unknown 1 1 1 1 1 1

Source: Employee Benefit Research Institute, Investment Company Institute, 2008.