The new jointstudy from the Investment Company Institute and the EmployeeBenefit Research Institute also indicates that more 401(k) planparticipants are investing in equities than was the case before thefinancial crisis in 2008. (Photo: Shutterstock)

Younger workers participating in 401(k) plans are allocating alarge part of their assets to target-date funds as well as to othertypes of balanced funds.

That's according to 401(k) Plan Asset Allocation, Account Balances, andLoan Activity in 2016, a new joint study from the InvestmentCompany Institute and the Employee Benefit Research Institute.

The study finds that at year-end 2016, 64 percent of 401(k)participants in their twenties held TDFs, compared with only 45percent of 401(k) participants in their sixties.

Recently hired participants—those with two or fewer years oftenure—are also using TDFs at a higher rate—59 percent—than 401(k)plan participants overall who invest in those funds, at 52percent.

The study also indicates that more 401(k) plan participants areinvesting in equities than was the case before the financial crisisin 2008.

In 2016, it shows, approximately 67 percent of 401(k) assetswere invested in stocks via through equity funds, the equityportion of balanced funds, and company stock.

Another 27 percent of plan assets were in fixed-incomesecurities such as stable value investments, bond funds, moneyfunds and the fixed-income portion of balanced funds.

“Retirement savers continue to invest heavily in equitiesthrough their 401(k) plans,” Jack VanDerhei, EBRI researchdirector, is quoted saying. VanDerhei adds, “Though this is inlarge part driven by younger plan participants, savers in theirsixties also remain focused on growth and held 55 percent of their401(k) plan assets in equity investments.”

In 2016, according to the report, just 7 percent of 401(k) planparticipants in their twenties had no equities; in fact, 77 percentof these younger plan participants had more than 80 percent oftheir account balances invested in equities.

That wasn't the case for older participants, with 11 percent ofparticipants in their sixties having no equities and 19 percenthaving more than 80 percent of their account balances inequities.

Investment in company stock by participants, however, iscontinuing at “historically low levels.” Just 6 percent of 401(k)plan assets were invested in company stock at year-end 2016, whichreflects a drop of more than two-thirds since 1999. At that time,company stock accounted for 19 percent of assets.