401k Turns 25 Years; Grew to 47 million Active Participants
401(k) November 10, 2006, marks the 25th anniversary of the 401(k) and now these plans have 47 million active participants, more than twice the 21 million who participate in private-sector defined benefit pensions. 401(k) plans held $2.4 trillion in assets in 2005, compared to $1.9 trillion in assets in all private-sector defined benefit pensions, according to a new study by the Investment Company Institute.
Other key findings from ICI's study:
- While 401(k)s were first offered as supplements to traditional pensions, the latest data shows that 90% of 401(k) plans are the only retirement plan offered by that employer. In 2002, some 350,000 employers offered 401(k) plans as their sole retirement plans.
- Mutual funds account for roughly half of the assets in 401(k) plans.
- More than half of today's young 401(k) participants can expect to retire with enough 401(k) assets to replace more than half of their pre-retirement income.
Some 25% of those eligible to participate in the 401(k) plans, don't -- even when the company offers a matching contribution. Less than 10% of investors save the maximum allowed, which will be $15,500 for an individual in 2007 and $20,500 for a person 50 or older. The typical contribution rate is 6% of salary with an employer match of 3%.