401(k) plan participants are taking a more balanced approach to investing despite market turbulence in recent years, and are making greater use of target-date funds, according to a joint Investment Company Institute-Employee Benefit Research Institute report.
By the end of 2010, seven out of 10 plans included target-date funds, according to the report, “401(k) Plan Asset Allocation, Account Balances and Loan Activity in 2010.” Recently hired participants in their 20s had 35% of account balances in target-date funds, up from 31% the previous year.
Of the 23 million participants in the latest study, 11.8% had no stock allocations, compared to 12.7% a decade ago in the 2000 study. The percentage of participants with 80% or more invested in stocks dropped to 40% from 54% in 2000.
“Individuals are less willing to take on financial risk, and the design of the plan is very different than it was a decade ago,” Sarah Holden, ICI senior director of retirement and investor research, said in a telephone interview.
Ms. Holden said a concern that plan participants, particularly younger ones, would be skittish about investing in the stock market given the turbulence of the last decade did not materialize.
“For most age groups, we see a little tempering but not getting out of the stock market. Younger participants tend to be newer to the plan and tend to have target-date funds,” she said.
The report covers roughly 46% of all active participants in 401(k) plans and represents $1.4 trillion in assets. It's based on voluntary reporting by record keepers for plans of all sizes.
The full report is available at ICI's website.