Nearly 80% of 401(k) plan participants in their 20s had more than 80% of their account balances invested in equities. Only half the people in that same age group held that much before the global financial crisis.

That’s the finding from a new joint study by the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI), released today.

“Our research finds that younger 401(k) plan participants today are much more comfortable holding a significant portion of their savings in equities,” said Sarah Holden, ICI’s senior director of retirement and investor research (and one of the study’s authors).

Younger participants, as a group, had more than 80% of their 401(k) plan assets invested in equities at the end of 2020. Among older investors in their 60s, however, the number was a lot less: Only 56% of them had that much in 401(k) plan assets, according to the study

The report is called “401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2020.”  

The study found that 401(k) plans are drawing “many young retirement savers and new hires.” Some 38% of 401(k) plan participants were in their 20s or 30s, and 24% were in their 40s in 2020.

Some 43% of 401(k) plan participants had five or fewer years of tenure, and about one-fifth of them were recent hires (people with two or fewer years of tenure).

Ownership of equities is widespread among 401(k) plan participants. Overall, 94% of 401(k) participants had at least some investment in equities at the end of 2020. The analysis is based on the EBRI/ICI database, which contains information on 11.5 million 401(k) plan participants in 76,507 plans—holding $1.0 trillion in assets. The database covers 19% of the universe of active 401(k) participants, the groups said.

While the needle in equity ownership overall has not moved in recent years, more 401(k) plan participants held equities at the end of 2020 than before the global financial crisis (defined by the trade groups as year-end 2007) and most had the majority of their accounts invested in equities.

Specifically, the new joint report found that 42% of all 401(k) plan participants’ account balances overall were invested in equity funds on average, which is in line with recent years. Another 35% of account balances were invested in balanced funds, largely target-date funds.

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