How do employees at IBM choose to invest for retirement?
IBM offers a 401(k) retirement savings plan (the IBM 401(k) Plus Plan) for its ~167,000 participants. Employees can choose to contribute a portion of their income to the plan.
But which investments do IBM employees pick as retirement investments?
What is a 401(k) Retirement Savings Plan
A 401(k) plan is a retirement savings plan offered by employers in the United States. It allows employees to save a portion of their salary before taxes are applied, meaning they pay less in taxes upfront.
The money is then invested in various options within the plan, such as mutual funds. Employers may also contribute to the employee’s 401(k) account, usually by matching a percentage of the employee’s contributions.
The funds in a 401(k) grow on a tax-deferred basis until they are withdrawn during retirement, at which point they are subject to regular income tax.
Some plans also offer a Roth 401(k) options where contributions are made “after-tax”, and withdrawals are tax-free in retirement.
A 401(k) retirement savings plan is a type of defined contribution plan.
IBM’s 401(k) Plan
The IBM plan allows for matching contributions. IBM makes matching contributions in an amount equal to 100% of the first 5% of compensation deferred by participants.
Form 5500 lists the investments IBM 401(k) plan participants selected for their retirement funds. Providing us insight into how IBM employees choose to invest for retirement.
401(k) plan sponsors are required to file Form 5500 with the Department of Labor each year.
So, what do IBM employees invest in?
Although directly investing in shares of IBM Stock is an option, it is not a top 10 holding for IBM employees in their 401(k) accounts. As opposed to some other tech companies (e.g., Amazon, Microsoft), IBM employees don’t select their company stock as a top holding.
The IBM 401(k) plan offers All-in-One Life Cycle Funds. These funds are designed to shift their holdings as the target retirement year approaches. They gradually shift to more bonds and fewer equities. In other words, they become more conservative as time passes.
The IBM plan is different than most other 401(k) plans with regard to target date retirement funds. Most other plans offer target date retirement funds as a mutual funds (or collective trusts). Meaning each participant invested in a target date fund would see a single holding in their 401(k) account.
IBM’s All-in-One Life Cycle Funds are composed of many Core Building Block Funds (plus some other funds). Meaning each participant’s account holds a number of individual funds that together make up the specific target date fund’s desired asset allocation.
IBM Employees Retirement Investments
The largest single holding across IBM employee’s retirement accounts is the Interest Income Fund. It represents 15% of total plan assets at nearly $10 billion in assets. This is one of the designated Core Building Block funds that are component parts of the All-in-One Life Cycle Funds.
The next largest holding—at 14% of plan assets—is the Vanguard Employee Benefit Index Fund. This fund tracks the performance of the S&P 500 Index, representing around 500 of the largest companies in the United States—a great choice for a core investment holding.
Plan assets as of 12/31/2021
(from IBM’s 2022 filing of Form 5500)
| Top 10 Investments | % |
| Interest Income Fund | 15% |
| Vanguard Employee Benefit Index Fund | 14% |
| Vanguard Total Stock Market Index Trust | 12% |
| SSGA Total International Stock Market Index | 8% |
| SSGA Small/Mid Cap Stock Index | 7% |
| SSGA Inflation Protected Bond | 4% |
| Vanguard Russell 1000 Growth Index Trust | 4% |
| Neuberger Berman Total Bond Market | 3% |
| SSGA Real Estate Investment Trust | 2% |
| Loomis, Sayles Total Bond Market | 2% |
See the IBM 401(k) page for additional plan details and value of holdings.
Source: 2021 Form 5500 for IBM’s 401k plan
