Americans Investing 401(k)s in Equities

Americans are mostly investing their 401 (k) plans in equities, either through mutual funds or company stock, according to data from the Employee Benefit Research Institute. Sixty-eight percent of 401(k) participants placed their plans in equity securities in 2005, which has changed little in recent years, the report states.

Younger Americans tend to hold a higher portion of their 401(k) accounts in equity assets. Participants in their 20s held 52% of their account balances in equity funds, compared to 38% of accounts balances for participants in their 60s.

Additionally, 10% of participants placed retirement assets in bond funds, 4% in money market funds and 13% in company stock.

Also, shares of company stock continued to fall, accounting for 13% of 401 (k) plan assets on average at year-end 2005, down from 19 % in 1999. The new downward trend suggests a change in plan design and in participants’ behavior, EBRI notes. Less new hires are holding company stock, and fewer are holding high concentration of company stock.