Complex Problems. Simplified Solutions.

Target-Date funds expand their reach in 401(k) plans

07 Jun
Vanguard How America Saves 2017 based on 2016 Defined Contribution Data - Target-Date funds roll on

Target-Date funds expand their reach in 401(k) plans

Share:

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.

 

 

Share:

Write a Reply or Comment