All is not well in retirement-land; 401(k) loans are getting bigger and baby boomers are putting too much money into stocks.

That’s according to Fidelity Investments’ latest quarterly retirement savings analysis of 401(k)s and individual retirement accounts (IRAs), which found that many older participants in 401(k)s, including boomers nearing retirement age, have stock allocations higher than industry experts recommend for their age group.

In comparing average asset allocations in the accounts to an age-based target-date fund (TDF), Fidelity found that 18 percent of people aged 50–54 had the allocation to stocks in their accounts that were at least 10 percent or even more above the recommended allocation level.

Older people had gone even deeper into equities, it found, with those aged 55–59 having accounts that were 27 percent above the recommended equity allocation level.

Another 11 percent of people aged 50–54 had 100 percent of their 401(k) assets in stocks, while 10 percent of people aged 55–59 had all of their 401(k) assets in stocks.

Some of the increased stock allocations come from a rising stock market—in fact, 401(k) balances are up 50 percent in the last five years. But people nearing retirement also could be trying to make up for lost time in saving, risking that the market won’t suddenly fall as they try to further boost the balances in their accounts before they leave the workplace.

Another worrisome factor is the growing size of the average loan from 401(k) accounts. The percentage of people initiating a loan hasn’t grown over the last several quarters, holding at 10.1 percent, and the percentage of outstanding loans has likewise not changed, at 21.9 percent.

However, looking at the past 12 months, the average loan amount was $9,720 at the end of Q2. That’s up from $9,630 at the end of Q1, and also up from $9,500 a year ago.

Instant Insights /

Loans up, stock allocations too high in retirement plans

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