One-quarter of 401(k) participants have money invested in a lifecycle fund, but, on average, only 7% of DC plan assets are invested in such funds, according to a joint report from the Employee Benefit Research Institute and Investment Company Institute.

Lifecycle and balanced funds are also popular among new or recent hires, with 28% of recently hired people in their twenties invested in balanced funds at the end of 2007, compared with 24% in 2006, 19% in 2005 and 7% in 1998. Also, at the end of last year, 19% of the account balances of recently hired people in their twenties was invested in lifecycle funds, compared with 16% at the end of 2006.

“The study’s findings highlight that 401(k) participants, particularly recent hires, are looking to diversify their account balances,” said Sarah Holden, senior director of retirement and investor research at the ICI.

Other important findings of the study also indicated that stock funds and equities have continued, at least through the end of last year, to be the most popular investment by far, with two-thirds of 401(k) participants’ assets invested in equity securities either through stock mutual funds or stocks. One-third was in fixed-income securities, including stable value, bond and money market funds.

The amount of 401(k) balances invested in company stock continued to shrink, by half a percentage point in 2007, to 10.6%.

Also of importance was 401(k) loan activity was steady, with 18% of all 401(k) participants eligible for loans having taken out one, on par with the 18% in 2006, with loans averaging 12% of the account balance.

The average account balance at the end of 2007 was $65,454, up roughly 6.6% from $61,346 at the end of 2006.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.