Schwab Report

Self-Directed 401(k) Balances Increase 22% Year-Over-Year

According to Charles Schwab’s SDBA Indicators Report, an industry-leading benchmark on retirement plan participant investment activity within self-directed brokerage accounts (SDBAs), the average account balance across all participant accounts finished Q2 2021 at $348,183, a nearly 22% increase year-over-year and a 4.3% increase from Q1 2021.

SDBAs are brokerage accounts within retirement plans, including 401(k)s and other types of retirement plans, that participants can use to invest retirement savings in individual stocks and bonds, as well as exchange-traded funds, mutual funds and other securities that are not part of their retirement plan's core investment offerings.

The second quarter SDBA Indicators Report also showed that trading volumes were in line with one year ago at an average of 14 trades per account, as participants encountered familiar COVID volatility with the rise of the Delta variant. Despite some fears, participants saw account growth year-over-year as stocks continued to climb off the March 2020 low and consumer confidence surged back to pre-pandemic levels.

The majority of participant assets were held in equities (37%). Mutual funds were the second largest holding at (30%), followed by ETFs (20%), cash (12%), and fixed income (1%).

Allocation Trends

The data also reveals specific asset class and sector holdings within each investment category:

• Mutual funds: Large-cap funds had the largest allocation at approximately 34% of all mutual fund allocations, followed by taxable bond (19%) and international (16%) funds.
• Equities: The largest equity sector holding was Information Technology at 29%. Apple was the top overall equity holding, comprising 10.26% of the equity allocation of portfolios. The other equity holdings in the top five include Tesla (6.28%), Amazon (5.03%), Microsoft (2.72%) and NVIDIA (1.84%).
• ETFs: Among ETFs, investors allocated the most dollars to U.S. equity (50%), followed by sector ETFs (15%), international equity (13%) and U.S. fixed income (13%).

Other Report Highlights

• Advised accounts held higher average account balances compared to non-advised accounts - $550,127 vs. $302,330.
• Gen X had the most advised accounts at 48%, followed by Baby Boomers (36%) and Millennials (13%).
• Gen X made up approximately 45% of SDBA participants, followed by Baby Boomers (32%) and Millennials (18%).
• Baby Boomers had the highest SDBA balances at an average of $532,338, followed by Gen X at $306,489 and Millennials at $103,777. All balances were up from Q1 2021.
• On average, participants held 12.3 positions in their SDBAs at the end of Q2 2021, up slightly from 10.5 last year and consistent with Q1 2021.

About the SDBA Indicators Report