Tuesday, July 31, 2007
Tweet[IWS] EBRI: 401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2006 [31 July 2007]
IWS Documented News Service
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
________________________________________________________________________
Employee Benefit Research Institute (EBRI)
August 2007
EBRI Issue Brief #308
Paperback, 40 pp.
401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2006 [31 July 2007]
http://www.ebri.org/publications/ib/index.cfm?fa=ibDisp&content_id=3838
or
Press Release
http://www.ebri.org/pdf/PR_773_31July07.pdf
Executive Summary
The average 401(k) retirement account rose for the fourth consecutive year in 2006. Propelled by strong stock market returns, the average 401(k) account increased 17 percent in 2006, according to the annual update of the EBRI/ICI 401(k) database. The EBRI/ICI analysis is based on the largest compilation of data on participants in 401(k) plans, which now are the primary retirement savings vehicle for the vast majority of working Americans covered by retirement plans.
Because 401(k) balances can fluctuate with market returns from year-to-year, meaningful analysis of 401(k) plans must examine how participants' accounts have performed over the long term. Looking at consistent participants in the EBRI/ICI 401(k) database over the seven-year period from 1999 to 2006 (which included one of the worst bear markets for stocks since the Great Depression):
--> The average 401(k) account balance increased at an annual growth rate of 8.7 percent over the period, to $121,202 at year-end 2006.
--> The median 401(k) account balance (half above, half below) increased at an annual growth rate of 15.1 percent over the period, to $66,650 at year-end 2006.
The bulk of 401(k) assets is invested in stocks. On average, at year-end 2006, about two-thirds of 401(k) participants' assets are invested in equity securities through equity funds, the equity portion of balanced funds, and company stock. About one-third is in fixed-income securities such as stable value investments and bond and money market funds. These relative shares have changed little over the past 11 years.
401(k) participants continue to seek diversification of their investments. The share of 401(k) accounts invested in company stock continues to shrink, falling by 2 percentage points (to 11 percent) in 2006. That continued a steady decline that started in 1999. Recently hired 401(k) participants contribute to this trend: they are less likely to hold employer stock.
New employees embrace lifestyle/lifecycle funds. Across all age groups, more new or recent hires are investing their 401(k) assets in balanced funds, including "lifestyle" or "lifecycle" funds. At year-end 2006, 24 percent of the account balances of recently hired participants in their 20s were invested in balanced funds, compared with 19 percent in 2005, and about 7 per-cent in 1998.
Participants' 401(k) loan activity is modest. In 2006, 18 percent of all 401(k) participants eligible for loans had taken a loan against their 401(k) account. Most loans tend to be small, amounting, on average, to 12 percent of the remaining account balance.
______________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
________________________________________________________________________
Employee Benefit Research Institute (EBRI)
August 2007
EBRI Issue Brief #308
Paperback, 40 pp.
401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2006 [31 July 2007]
http://www.ebri.org/publications/ib/index.cfm?fa=ibDisp&content_id=3838
or
Press Release
http://www.ebri.org/pdf/PR_773_31July07.pdf
Executive Summary
The average 401(k) retirement account rose for the fourth consecutive year in 2006. Propelled by strong stock market returns, the average 401(k) account increased 17 percent in 2006, according to the annual update of the EBRI/ICI 401(k) database. The EBRI/ICI analysis is based on the largest compilation of data on participants in 401(k) plans, which now are the primary retirement savings vehicle for the vast majority of working Americans covered by retirement plans.
Because 401(k) balances can fluctuate with market returns from year-to-year, meaningful analysis of 401(k) plans must examine how participants' accounts have performed over the long term. Looking at consistent participants in the EBRI/ICI 401(k) database over the seven-year period from 1999 to 2006 (which included one of the worst bear markets for stocks since the Great Depression):
--> The average 401(k) account balance increased at an annual growth rate of 8.7 percent over the period, to $121,202 at year-end 2006.
--> The median 401(k) account balance (half above, half below) increased at an annual growth rate of 15.1 percent over the period, to $66,650 at year-end 2006.
The bulk of 401(k) assets is invested in stocks. On average, at year-end 2006, about two-thirds of 401(k) participants' assets are invested in equity securities through equity funds, the equity portion of balanced funds, and company stock. About one-third is in fixed-income securities such as stable value investments and bond and money market funds. These relative shares have changed little over the past 11 years.
401(k) participants continue to seek diversification of their investments. The share of 401(k) accounts invested in company stock continues to shrink, falling by 2 percentage points (to 11 percent) in 2006. That continued a steady decline that started in 1999. Recently hired 401(k) participants contribute to this trend: they are less likely to hold employer stock.
New employees embrace lifestyle/lifecycle funds. Across all age groups, more new or recent hires are investing their 401(k) assets in balanced funds, including "lifestyle" or "lifecycle" funds. At year-end 2006, 24 percent of the account balances of recently hired participants in their 20s were invested in balanced funds, compared with 19 percent in 2005, and about 7 per-cent in 1998.
Participants' 401(k) loan activity is modest. In 2006, 18 percent of all 401(k) participants eligible for loans had taken a loan against their 401(k) account. Most loans tend to be small, amounting, on average, to 12 percent of the remaining account balance.
______________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
# posted by SBasefsky : 8:32 AM
