Use of asset allocation or lifestyle funds as the default option in 401(k) plans is increasing among plan executives concerned about participants getting the best investment choices.
Fidelity Institutional Retirement Services, Boston, has "hundreds" of 401(k) plans using the Fidelity Freedom funds as the default option in their 401(k) plans, according to Steve Deschenes, executive vice president of the firm.
"It's a way to optimize the returns for less involved investors," said Mr. Deschenes. "The folks who end up with the default option have inertia," he added. Using the asset allocation funds as a default option "is a way to make inertia work for you."
Fidelity's Freedom funds are age-based lifestyle funds, starting at the year 2010 and sequencing every five years (2015, 2020, 2025, etc.).