By: Liz Strait, PhD
Introduction
National 401(k) Day is observed annually on the Friday after Labor Day (that’s today!). It was started in the mid-1990s by the PSCA. The goal of its observance is to encourage workers to save and invest wisely for their retirement and to raise awareness about the significance of employer-sponsored retirement plans in achieving long-term financial security.
In celebration of National 401(k) Day and in pursuance of its goals, we are sharing some of our favorite facts about 401(k)s and some interesting behavioral finance findings focused on 401(k) plans.
401(k) Facts
- Over $92 billion (1.4%) is lost from 401(k)s each year due to leakage (cashing out some or all the account).1
- The median balance for 401(k) plans is approximately $27,000.2 But this is vastly different depending on account holder age:
Source: Nerdwallet (2023)
- The median employer contribution (match) is 4%.2
- Baby boomers, men, White (non-Hispanic), and Asian individuals are most likely to own any kind of retirement account.3
- As of Q2 2023, 17.1% of 401(k) participants have an outstanding loan balance (for a loan they took out against their 401(k)).4
- Fifty-six percent of the American workforce does not have access to a 401(k) plan.5
- Thirty-five percent of all plan assets are in U.S. Equity funds.2
- Participation rates increase when an employer matches contributions (vs. doesn’t match), but the rate the employer matches at does not affect overall participation.6
- Women are more likely than men to enroll in 401(k) plans that don’t have automatic enrollment.7
> This difference is largest for men and women earning $50,000 - $74,999. In this income bracket 81% of women participate while only 67% of men do.
- Men have significantly higher average 401(k) balances than women ($93,512 vs. $70,037).2 This is due to higher income deferral rates and the wage gap between men and women.
> Men save 7.5% of their income vs. 7% for women.2
> For every $1 a man earns working full-time, women only earn 83.4 cents.8
Source: Bank of America.
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Data Sources
[1] Morningstar, 2020.
[2] Vanguard, 2023.
[3] 2020 U.S. Census Data.
[4] Fidelity Investments, 2022.
[5] Economic Innovation Group.
[6] Bassett et al., Federal Reserve Board.
[7] CNBC.
[8] Bureau of Labor Statistics (BLS).
[9] Iyengar & Wei, 2004; Iyengar & Kamenica, 2006.