Does a 401(k) Earn Interest? What 54,296 Plan Filings Show

By Craig Wear, CFP® | Last reviewed: November 1, 2026

A 401(k) does not earn interest at a set rate the way a savings account does. It earns whatever its investments earn: interest only in stable value, money market and bond options, plus dividends and price changes everywhere else. In 2024 filings, interest was 1.32% of large 401(k) plans’ $969 billion investment gain.

That last figure comes from a Q3 tabulation of every large 401(k) plan’s 2024 Form 5500 Schedule H, the financial statement each plan with roughly 100 or more participants files with the Department of Labor. The 54,296 plans in the tabulation held $6.83 trillion at the start of their 2024 plan years and reported $969.2 billion of investment income, equal to 14.2% of starting assets. Almost none of it was labeled interest.

Which 401(k) investment options actually pay interest?

Only the fixed income options in a 401(k) menu pay interest directly: stable value funds, insurance company fixed accounts, money market funds and bond funds. Stock index funds, target date funds and company stock grow through dividends and price changes instead, so a participant’s “interest” depends entirely on how much of the balance sits in the first group.

The federal Thrift Savings Plan shows what a true fixed interest option looks like inside a 401(k)-style plan. Under 5 U.S.C. 8438(e)(2), the G Fund’s special Treasury securities pay the average market yield on marketable Treasury debt not due or callable for at least 4 years, computed at the prior month end and rounded to the nearest one eighth of 1 percent. Private employer plans have no statutory rate like that; their nearest equivalent is a stable value fund.

How much of a 401(k)’s 2024 growth was interest, according to Form 5500?

Very little. Across the 54,296 large 401(k) plans that filed a 2024 Schedule H, directly reported interest was $12.8 billion, or 1.32% of the $969.2 billion investment gain, and dividends were another 9.49%. The remaining 89% arrived as price appreciation or as a single bundled “net investment gain” from pooled funds, where interest and dividends are folded in rather than shown separately.

Source: Q3 tabulation of DOL Form 5500 PY2024 public data set (filings with feature code 2J, Schedule H attached, direct filing entities excluded, latest filing per EIN and plan number, starting and ending net assets above zero). Rents of $5 million omitted from the rows. One plan year, not an average or a forecast.

Three readings follow from the table. First, the largest single line of “interest” in 401(k) filings was not market interest at all: $5.73 billion, or 44.7% of all directly reported interest, was participants paying interest on loans from their own accounts. Second, the median plan with at least $1 million of assets earned 13.5% on a dollar-weighted basis in 2024 (10th percentile 10.9%, 90th percentile 16.2%), and fewer than 0.1% of plans lost money, a spread driven by the stock share of each plan rather than any interest rate. Third, plan-paid administrative expenses were $6.84 billion, or 0.10% of starting assets, a separate drag from fund expense ratios already netted inside the gain lines; what 401(k) fees cost over a career is a separate calculation.

On the balance sheet, the interest-paying assets were thin as well. Participant loans were $82.18 billion (1.06% of the $7.74 trillion in year-end assets, held in 83.8% of plans), insurance company general accounts were $73.70 billion (0.95%, in 30.8% of plans), and interest-bearing cash was $47.38 billion (0.61%). Collective trusts at 36.9% and mutual funds at 31.7% held most of the money, which is why their bundled gains dominate the income table.

Why do the filings show so little interest when bond funds pay plenty?

The Form 5500 rules relabel it. A bond mutual fund’s interest reaches the plan as a fund distribution, which the 2024 Schedule H puts on line 2b(2)(C) as a dividend from registered investment company shares. Interest earned inside a collective trust, pooled separate account or master trust is never shown as interest; the instructions for lines 2b(6) through 2b(9) say to report “all earnings, expenses, gains or losses” of those entities as one net figure.

The effect grows with plan size. In plans with $10 million to $100 million at the start of 2024, interest plus dividends was 21.4% of investment income, while in the 1,007 plans with $1 billion or more it was 6.3%, because those plans held 28.4% of assets in master trusts and 45.1% in collective trusts. Any participant statement that reports one “change in value” figure per fund has the same blind spot as these 2b(6) through 2b(10) lines.

What is the “average 401(k) interest rate” people search for?

There is no average 401(k) interest rate, because the account has no rate; the number searchers find is either an average total return or the yield on one cash-like option. For 2024, the median large plan’s return was 13.5%, while the money market and cash sleeves of those same plans earned an implied 4.88% (interest on line 2b(1)(A) divided by average interest-bearing cash in 12,161 plans holding more than $50,000 of it).

That 4.88% sits inside the range the SEC reports for government money market funds, whose asset-weighted 7-day net yield ran from 5.16% in January 2024 to 4.32% in December 2024 in the SEC Money Market Fund Statistics (Table 4.3, built from Form N-MFP). By September 2026 that net yield was 3.71%, with a gross yield of 3.92%. A government money market fund must hold 99.5% or more of its assets in cash, government securities or repurchase agreements under 17 CFR 270.2a-7(a)(14), which is why its yield tracks short-term Treasury rates.

Long-run return assumptions by stock and bond mix are a different question; realistic 401(k) returns by age covers that. The same container logic applies to individual accounts, explained in whether traditional IRAs earn interest.

Does daily or monthly crediting change what a 401(k) cash option earns?

Barely. The crediting schedule moves annual earnings by a few dollars per $10,000, while the rate itself and the share of the balance in cash move them by hundreds or thousands. Fund share prices reprice every business day, a mechanic covered in how often a 401(k) compounds in retirement; for an interest-paying option, the table isolates the frequency effect.

Q3 calculation using the SEC’s September 2026 government money market net yield of 3.71%, treated as a stated annual rate; hypothetical balance; rates change monthly and this is not a projection.

The gap between annual and daily compounding is $69.48 on $100,000. Compare that with contributions under the 2026 limits: a worker deferring the full $24,500 elective deferral adds more principal in one year than the daily-compounded interest on $600,000 at 3.71%, and the age 50 catch-up of $8,000 (or $11,250 at ages 60 to 63) widens the gap. For most savers before retirement, contributions and asset mix explain far more of the balance than any interest schedule.

Do stable value and insurance fixed accounts pay a fixed interest rate?

They credit a declared rate that cannot fall below zero, but the rate resets and the floor is backed by insurers and banks, not the FDIC. The Parker Retirement Savings Plan’s 2025 Form 11-K, filed June 24, 2026, describes a typical structure: its Contract Income Fund held $464.1 million at contract value, and its constant duration wrap contracts reset the crediting rate quarterly from the book value, market value, yield and duration of the underlying bonds.

The same filing says each contract carries “an interest crediting rate of not less than zero percent,” and that employer-initiated events can limit transactions at book value. The Department of Labor treats these products narrowly: under 29 CFR 2550.404c-5(e)(4)(iv) a capital preservation fund can serve as a plan’s default investment for no more than 120 days after a participant’s first elective contribution, and stable value qualifies as a long-term default only for money invested before December 24, 2007 under paragraph (e)(4)(v). After that window, a defaulted new hire’s money goes to a target date, balanced or managed account option under paragraphs (e)(4)(i) through (iii), not an interest-paying fund.

How much of the “interest” in 401(k) filings is participants paying themselves?

Nearly half. Participant loan interest was $5.73 billion of the $12.82 billion in directly reported 401(k) interest for 2024, an implied 7.34% on average outstanding loan balances (7.64% in the median plan with loans over $100,000). That money is credited back to the borrower’s own account, so it is a transfer from paycheck to plan, not a market return.

Federal rules push loan rates toward bank rates. Under 29 CFR 2550.408b-1(e), a participant loan must give the plan “a return commensurate with the interest rates charged by persons in the business of lending money,” and plans document that test with a written formula. Parker’s plan, for example, uses one percent above the prime rate on the last day of the previous quarter; with prime at 7.00% since September 17, 2026, that formula produces 8.00% for a loan requested in the fourth quarter of 2026. The TSP instead sets its loan rate equal to the G Fund rate for the month before the request, according to tsp.gov.

Worked example, hypothetical: a $20,000 loan at 8.00% repaid monthly over 54 months costs $442.25 a month and $3,881.42 of total interest, all of it deposited into the participant’s own account. Under IRC section 72(p)(3), that interest is not deductible when the loan is secured by elective deferrals, and in a traditional 401(k) the repaid interest is taxed again when withdrawn. The trade-offs against a home equity line are worked through in HELOC vs 401(k) loan costs.

When is the interest a 401(k) earns taxed?

Not when it is earned. A 401(k) trust is tax exempt, so interest, dividends and gains inside it generate no Form 1099-INT or 1099-DIV; under IRC section 402(a), amounts from a pre-tax account are taxable “in the taxable year of the distributee in which distributed,” at ordinary income rates, regardless of whether the growth began as interest or capital gains. How that treatment compares with a taxable account is covered in 401(k) vs brokerage account taxes.

That conversion of every kind of growth into ordinary income is the planning hinge. Moving pre-tax dollars to a Roth account through an in-plan Roth conversion triggers tax on the converted amount in that year, and future interest and growth on it can then come out tax free once the Roth rules are met; for a single filer in 2026, the 24% bracket tops out at $201,775 of taxable income, a common ceiling people test conversions against.

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This article is for educational purposes only and is not individualized investment, tax, or legal advice. Consult a qualified professional about your specific situation.