Target-date funds hold 27% of 401(k) assets, study finds

Assets in target-date funds accounted for 27% of 401(k) plan assets at the end of 2018, according to an analysis of a database compiled by the Employee Benefit Research Institute and the Investment Company Institute.

The study found that at the end of 2018, more than half (56%) of 401(k) participants in the database held target-date or lifecycle funds.

The use of target-date funds skews to younger plan participants, the study found, with 62% of plan participants in their 20s holding the funds, compared with 50% of those in their 60s. Similarly, those in their 20s had 51% of their assets in target-date funds, compared with 23% among those in their 50s.

The plan participants investing in target-dates tend to have bigger allocations to equities than those who don't. Those who held target-date funds had 66% of their 401(k) plan assets invested in equities, compared with 60% for participants not holding target date funds. The youngest target-date fund investors in plans had the highest allocation to equities compared with their counterparts not holding target-date funds. Older 401(k) plan participants had similar allocations to equities whether they were target-date fund investors or not, EBRI said in a release.

The study also found that those investing in target-dates tend to stick to just one; 94% of participants owning target-date funds held one target-date fund at year-end 2018, with little variation by age.

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