Target-Date funds expand their reach in 401(k) plans
Vanguard Group recently issued their 110 page “How America Saves 2017” report on the behavior of defined contribution plan participants in the plans that they record-keep. The trend toward professionally managed options – primarily target-date funds – continues with 53% of participants using such accounts in 2016 (46% were in a single target-date fund). This is a substantial increase from 17% in 2007. Their research projects that 75% of participants will be solely invested in professionally managed options by 2021.
With the trend toward more professional managed options continuing, a few other plan statistics may be of interest:
| 2013 | 2014 | 2015 | 2016 | |
| Participation Rate | 75% | 77% | 78% | 79% |
| Average Deferral Rate | 7.00% | 6.80% | 6.90% | 6.20% |
| Median Deferral Rate | 6.00% | 6.00% | 6.00% | 5.00% |
| Average Balance | $101,650 | $102,682 | $96,288 | $96,495 |
| Median Balance | $31,396 | $29,603 | $26,405 | $24,713 |
| Average Equity Allocation | 71% | 72% | 71% | 71% |
| % of Plans with Automatic Enrollment * | 34% | 36% | 41% | 45% |
| * Plans with Automatic Enrollment have a 90% participation rate | ||||
For more detail by industry, size or more, we encourage you to check out their report. So, the trend toward professionally managed accounts continues while automatic enrollment is approaching the norm. The increased prevalence of automatic enrollment has decreased average & median deferral rates as 52% of default enrollment rates are at 3.0% or less and only 20% are at 6% or more.
About The Author As President and CEO of Odyssey Advisors, Parker Elmore is dedicated to quality service, expertise, and efficiency. With over 25 years of industry experience, Parker and the Odyssey team develop and implement solutions to the complex financial issues faced by...
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