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June 24, 2011 at 12:08 PM
Almost 30% of 401(k) participants are enrolled in automatic professionally managed investment programs, including target-date or balanced funds or a managed account advisory service, according to a study released Wednesday by Vanguard.
By the end of 2010, 29% of Vanguard participants were fully invested in an automatic investment program. One-fifth of participants held a target-date fund, 6% had a balanced fund and 3% used a managed account program. The report noted that automatic programs are especially beneficial to participants without the skills to invest on their own.
“The g
rowing number of participants taking advantage of professionally managed investment programs and services in their plan clearly shows that the 401(k) system can offer investors a successful way to invest for retirement,” Jean Young, coauthor of How America Saves 2011, said in a press release.
The average account balance in 2010 was over $79,000, with a median of just under $27,000. These are the highest levels recorded since 199 when Vanguard began tracking this data.
“Account balances have been cited as too low to be helpful in retirement,” Steve Utkus, coauthor of the report, said in a statement, adding that the typical participant is a 46-year-old male saving less than 9% with 20 to 25 years left to continue working and saving. “His retirement plan assets will be complemented by Social Security benefits and other savings, perhaps assets in other employer plans or a spouse’s plan, or personal savings. Even though we always encourage people to save more—ideally at least 12% to 15% of their income—the reality is that many participants may be on target for retirement.”
Automatic enrollment continued its upward trend, climbing three points since 2009 to 24% of plans. Participation, however, fell slightly to 74%. Economic conditions that prevented people from contributing offset gains made by automatic enrollment.
