Seventy-five percent of defined contribution plans for which Vanguard is record keeper offered target-date funds in 2009, and 42% of those plans' participants invested in them, according to a Vanguard survey.
This latest annual survey of participants in DC plans — “How America Saves 2010” — noted a dramatic increase target-date fund offerings. In 2004, the first year the Vanguard survey tracked target-date funds, 13% of Vanguard client plans had target-date funds and 11% of eligible participants invested in them, according to data provided in the latest survey.
The percentage of plans offering target-date funds and eligible participants using them has climbed every year since 2004, even during the market turbulence of 2008-‘09, according to the survey.
More participants are invested solely in a professionally managed automatic investment such as target-date funds, balanced funds or managed accounts, Jean Young, senior research analyst at Vanguard Center for Retirement Research, said in an interview.
Twenty-five percent of participants in the survey were invested solely in such options, compared to 7% five years ago, she said.
“We expect this trend to continue as more sponsors add target-date funds,” said Ms. Young, the lead author of the survey.
Also, 11% of participants are invested solely in fixed income, and 14% were invested only in equities last year. According to data contained in the latest survey, the annual percentages of fixed-income-only investors have ranged between 11% and 13% since 2004.
However, the percentage of investors only in equities has dropped steadily from 21% in 2004, according to data contained in the latest survey.
The Vanguard survey was based on records of more than 3.2 million participants in 2,200 DC plans for which Vanguard is a record keeper.