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Fidelity® 401(k) Average Balance Reaches New High, Boosted by Resurgent Stock Market
1 out of 3 401(k) participants benefit from professionally managed investment options, adoption of target date funds and managed accounts grow in workplace retirement plansBOSTON – Fidelity Investments® - the nation’s largest 401(k) provider1 - today announced its average 401(k) balance rose to a new high of $84,300 at the end of the third quarter, up 11.1 percent from a year ago, thanks in large part to a resurgent stock market (see chart)2. Employees who were continuously active in their 401(k) plan over the last 10 years saw the average balance rise 19.6 percent to $223,100 during the past 12 months. For pre-retirees age 55 or older who have been active in their plan for at least 10 years, the average balance is now $269,500.
Fidelity also found that with the increased adoption and availability of target date funds and managed accounts in workplace retirement plans, 1 out of 3 employees now utilize a professionally managed investment option for their 401(k) assets. Just a decade ago, nearly all plan participants were “do-it-yourself” investors, those who made the bulk of their investment decisions completely on their own.
“Today’s 401(k) plan is profoundly different than it was a decade ago,” said James MacDonald, president of Workplace Investing at Fidelity. “Plan design has evolved greatly to reflect the fact that 401(k) plans are often the primary driver of retirement savings for most working Americans. Professionally managed investment options can help working Americans achieve better retirement outcomes by creating a diversified portfolio, which is often the most challenging aspect of participating in a workplace retirement plan.”
Employees Don’t Want to Go it Alone When it Comes to Asset Allocation
While nearly all 401(k) participants were “do-it-yourself” investors a decade ago, the population of participants who are choosing their own investment line up has dropped dramatically with the rise and use of target date funds and managed accounts.
At the end of the quarter, one third (33.1 percent) of 401(k) participants had 100 percent of their plan assets in a target date fund, up from just 3 percent 10 years ago. These professionally managed mutual funds provide investors an age-based, diversified portfolio that gradually becomes more conservative as the investor nears retirement and beyond. For younger Gen Y3 participants, 55 percent had all their assets in a target date fund, providing this population with a considerable improvement in their age-based asset allocation over prior years.
However, as investors age or build larger balances they may be faced with more complex and competing financial needs. Targeted investment guidance can adjust to their changing financial situation and offer asset allocations other than a target date fund. For these investors, a professionally managed account can provide an experience that takes into consideration assets outside their 401(k), such as an IRA, pension or spouse’s savings, as well as an investor’s varied risk tolerances and retirement dates.
Since the third quarter of 2009, Fidelity has seen a more than three-fold increase in the portion of employers offering managed accounts to their employees, as well as the number of participants taking advantage of the service. In addition, assets in retail managed accounts – such as those in IRAs or individual brokerage accounts – have more than doubled since then.
“A managed account acknowledges that some participants prefer a more personalized approach with their investment strategy based on their specific needs, including their emotional tolerance for risk or assets outside their 401(k),” said MacDonald.
Investor Education Part of Plan for Life Workplace Guidance Experience
Fidelity offers workplace retirement investors Plan for Life, an educational guidance experience. Plan for Life helps employees at all stages of their careers, from just starting out to pre-retirees, by offering education on topics that matter to them most, such as asset allocation and whether a target date fund or managed account is right for them; creating a retirement income plan; and saving for escalating health care costs. This guidance experience can be accessed through dedicated telephone representatives, online, in-person and over the company’s innovative smart phone and tablet apps. For many pre-retirees, Fidelity offers in-person consultations that may include a spouse or family member.
For a media-ready infographic depicting the average balance and impact of stock market, please click here:Fidelity Q3 401(k) Infographic
About Fidelity Investments
Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $4.4 trillion, including managed assets of $1.9 trillion, as of September 30, 2013. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.
1 This statement is based on the results of a combination of independent media surveys. Fidelity was ranked first in DC assets under administration as of December 31, 2012 by Pensions & Investments’ annual Defined Contribution Record Keepers Survey, first in total recordkeeping assets and participants as of December 31, 2012 by PLANSPONSOR in its annual Defined Contribution Recordkeepers Survey, and first in DC assets recordkept as of December 31, 2011 in Cerulli Associates Quantitative Update Retirement Markets 2012.