Retirement Investing After the Bear: Less Risk, Better Balance

Posted on : Apr 29, 2012 | Filled under : News

A new report by the Investment Company Institute (ICI) and the Employee Benefit Research Institute (EBRI) shows shifting allocations within 401(k) plan  holdings.

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The recession keeps older investors out of stocks, but younger workers keep the faith.

Once burned, twice shy. That essentially describes the average retirement investor’s behavior in the wake of the past decade’s two bear markets, according to a new report by the Investment Company Institute (ICI) and the Employee Benefit Research Institute (EBRI).1 The report shows shifting allocations within 401(k) portfolios.

The study, which looked at allocations of more than 23 million 401(k) accounts, showed that the share of participants with more than 80% of their balances invested in stocks dropped from 54.1% in 2000 to 40.0% in 2010. Older investors in particular reduced their stock holdings — with those in their 60s reducing their equity allocations from 39.7% in 2000 to 21.4% in 2010.

Yet the report also showed that younger investors have not shied away from stocks. On the contrary, the percentage of 401(k) participants in their 20s with 80% or greater allocation to stocks rose from 55.3% in 2000 to 60.4% in 2010. The report attributes this to the greater use of target-date funds.

“Growing use of target-date funds appears to be helping to keep younger 401(k) participants invested in balanced portfolios, with equity exposure to help their assets grow over the long term,” said Sarah Holden, ICI senior director of retirement and investor research. “While our surveys and others have shown that investors are less willing to take on stock market risk, 401(k) plan features are countering that trend for plan participants. That’s particularly valuable to provide younger participants diversified portfolios that include growth-oriented investments.”

Other study findings:

  • The shares of 401(k) participants who had either no equities at all or high concentrations of equities were lower in 2010 than in 2000.
  • The share of 401(k) assets invested in company stock fell to 8% in 2010.
  • The average 401(k) balance was 3.4% higher at year-end 2010 versus a year earlier.
  • In 2010, 21% of all 401(k) participants eligible for loans had loans outstanding against their 401(k) accounts, unchanged from year-end 2009, but up from 18% at year-end 2008.
  • Participants’ 401(k) loan balances declined slightly. Loans outstanding amounted to 14% of the remaining account balance, on average, at year-end 2010, compared with 15% at year-end 2009.

For a copy of the full report, go to



1 Source: EBRI/ICI, “401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2010,” December 2011.


April 2012 – This column is provided through the Financial Planning Association, the membership organization for the financial planning community, and is brought to you by King Wealth Planning, Inc., a local member of FPA.

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