Investments held in 401(k) accounts tilted heavily to stocks at the end of last year with target date funds gaining popularity, even with younger workers, according to a report by the Investment Company Institute.
The report found that 61 percent of 401(k) assets was invested in equity securities through equity funds, the equity portion of balanced funds and company stock. One-third was held in fixed-income securities.
Target date funds were offered by 72 percent of plans with 15 percent of assets invested in them. Target date funds, which automatically rebalance investments to provide income as an investor nears retirement, were held in 41 percent of 401(k) accounts, up from 39 percent the prior year.
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The report, which used a database of 24 million participants in 64,619 plans maintained by ICI in conjunction with the Employee Benefits Research Institute, found that recent hires in their 20s, at 43 percent, were slightly more likely to invest in target date funds than were others. That was up from 40 percent at the end of 2011.
The average account balance was $63,929 at the end of last year compared to $58,991 a year earlier. At the end of 2008, the average was $45,519. A large portion, 39.6 percent, held less than $10,000, while 8.5 percent were worth more than $200,000.
The age of a retirement plan participant and how long he or she has worked for a company correlated with 401(k) account balances of more than $100,000.
For example, the report said, 18 percent of participants in their 60s with five to 10 years of tenure with their employer had account balances that high. For those in the same age group with 30 or more years of service, the percentage jumped to 52 percent.
Another important factor for building assets was salary. For instance, those in their 60s earning $100,000 per year with at least 10 years of tenure had average balances of $323,885. Those in the same age group making $20,000 to $40,000 had $54,867 in average 401(k) assets. The correlation between retirement savings and salary held among all age groups.
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