Less Than 1% of 401k Assets in MMFs
ICI recently published a "Perspective" entitled "401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2020," which shows that money market funds continue to be a very small portion of retirement plan assets. They write, "Among individual 401(k) plan participants, the allocation of account balances to equities (equity funds, company stock, and the equity portion of balanced funds) varies widely around the average of 69 percent for all participants in the 2020 database.... `Younger participants tended to favor equity funds and balanced funds, while older participants were more likely to invest in fixed-income securities such as bond funds, GICs and other stable value funds, or money funds. For example, among participants in their twenties, the average allocation to equity and balanced funds was 89 percent of assets, compared with about 70 percent of assets among participants in their sixties." A chart entitled, "Average Asset Allocation of 401(k) Plan Accounts by Participant Age" shows the amount held in money funds averaged 0.9% (For those in their 20's, MMFs averaged 0.3%; for the 30's, it was 0.5%; the 40's were 0.7%; the 50's averaged 0.9%; and the 60's averaged 1.3%. GICs and other stable value fund holdings averaged 5.6%. (For those in their 20's, it was 1.7%; the 30's was 2.2%; the 40's 3.4%; the 50's 5.8%; and the 60's 8.4%.) Bond fund holdings in 401k plans averaged 8.7% (20's 4.9%; 30's 5.3%; 40's 7.1%; 50's 9.1%; and, 60's 11.2%). The survey also says, "The 401(k) plan sponsor selects the investment options available in the plan. Figure A7 in the excel file presents the distribution of plans, participants, and assets by four combinations of investment offerings. The first category is the base group, which consists of plans that offer neither company stock nor GICs or other stable value funds. Twenty-six percent of participants in the 2020 EBRI/ICI 401(k) database were in these plans, which generally offer equity funds, bond funds, money funds, and balanced funds as investment options. Another 52 percent of participants were in plans that offer GICs and other stable value funds as an investment option, in addition to the base options. Alternatively, 10 percent of participants were in plans that offer company stock but no stable value products, while the remaining 12 percent of participants were in plans that offered both company stock and stable value products in addition to the base options."
