401k is the only tax code that almost every US worker knows. These employer sponsored, participant directed retirement plans have become an important part of life with defined contribution (DC) plans like 401k and 403 used by 80 million people and available to 60 of full-time workers over 21 years old. For many, it is their introduction to investing. So it’s important from time to time to look at the statistics to get some perspective.
The ICI (Investment Company Institute) offered up these 10 facts they found important about 401k plans:
- Of the $6.7 trillion in DC plans, 401ks account for 64% or $4.3 trillion followed by 403b plans at just less than $1 trillion.
- Two thirds of participants are less than 40 years old with 11% in their 60’s.
- 401k plans are used by households of all income levels with 53% earning between $25,000 and $99,000 annually.
- Participants agree that 401k plans help them think long-term beyond paying day-to-day expenses inspired by the tax savings.
- Over three quarters of all plans covering 88% of all participants offer a company match.
- Account balances rise with age and tenure; for example, workers in their 60’s with 30 years of tenure average almost $275,000 compared to those in their 20’s with 5-10 years of tenure at $19,000.
- Equities still dominate investment choices offered by 99% of all 401k plans followed by index funds (89.6%), bond funds (97.8%), target date funds (73%) and capital preservation funds like GICs (69.8%).
- Equity funds also dominates the share of assets in 401k plans at 66.2% followed by target date (18%), bonds (8.4%) company stock (7.0%).
- 401k plans offer lower priced funds than industry asset weighted averages at 0.53% compared to 0.68% overall.
- Only 17% of participants have outstanding loans although 54% of plans covering 87% of all participants offer them.
Good news? Yes. Room for improvement? Definelty!
