Fidelity® Reports Employee and Employer 401(K) Contributions Continue to Edge Higher in Second Quarter
Analysis Reveals Higher Adoption of Target Date Funds and Roth 401(k) Among
BOSTON – Fidelity Investments®
, the nation’s largest 401(k) provider1
, announced today that employee and employer 401(k) contributions continued to increase during the second quarter, compared to the same period in recent years. Analysis of Fidelity’s Gen Y participants, those born between 1979 and 1991, revealed stronger adoption of target date funds and Roth 401(k) compared to other age groups.
Fidelity’s analysis of its 11.9 million 401(k) accounts show that employee and employer contributions have been increasing steadily since 2009. The average contribution from employees rose to $1,660 during the second quarter, up $30 from the same period last year and up $150 from the same period in 2009. The average employer contribution climbed to $950 during the second quarter of this year, up $30 from the same period last year and up $90 from the same period in 2009. The average 401(k) balance dropped slightly to $72,800 at the end of the second quarter, down 2.5 percent from the end of the first quarter ending March 31.
“Rising contribution levels from both employees and employers show a strong commitment that both have to workplace savings plans,” said James M. MacDonald, president, Workplace Investing, Fidelity Investments. “Trends we are seeing among our more than two million Gen Y participants are particularly exciting. They are starting off with better diversified portfolios than previous generations which can have a positive impact over the long term.”Higher Adoption of Target Date Funds and Roth 401(k) Among Gen Y
In the second quarter, Fidelity analyzed the 401(k) accounts of its approximately 2.2 million Gen Y participants. The company’s analysis turned up a number of positive trends, including:
• Gen Y most properly allocated age cohort:
Across all 401(k) participants, 45 percent are within +/- 10 percentage points of the Fidelity Freedom Fund®
equity rolldown schedule2
, a gauge the company uses to determine an age-based asset allocation that may be appropriate. But for Gen Y participants, that number jumps to 67 percent, illustrating how younger investors have embraced age-based asset allocation. Many have achieved diversification through the adoption of target-date funds, which are often the default option for plans with auto enrollment. Among plans that offer target-date funds as investment options, half (51 percent) of Gen Y participants have 100 percent of their assets in a target date fund compared to 30 percent of participants of all ages in plans that offer target date funds.
• Roth 401(k) adoption rises, especially among youngest savers:
The number of employers offering a Roth 401(k) savings option rose to 35 percent from only 10 percent five years ago. More than half (55 percent) of Fidelity 401(k) participants are in plans that offer a Roth 401(k), up from 15 percent five years ago. In plans that offer Roth 401(k), usage of the savings option is greatest among Gen Y participants with 8.8 percent contributing to them, versus 5.8 percent among all active participants.About Fidelity Investments
Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $3.6 trillion, including managed assets of $1.6 trillion, as of June 30, 2012. 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 Workplace defined contribution data is based on more than 20,000 plans and 11.9 million recordkept participants as of June 30, 2012, and excludes tax-exempt market plans. The analysis is based on qualified plans and includes data from Fidelity Advisor 401(k) Program.
2 Determination of whether a participant is within 10 percentage points of the Fidelity Freedom Fund® rolldown assumes a retirement age of 65. Freedom Funds are target-date lifecycle funds designed to become more conservative and to hold a smaller percentage of equities as investors approach their retirement date. Investors should allocate assets based on individual risk tolerance, investment time horizon, and personal financial situation. A particular asset allocation may be achieved by using different allocations in different accounts or by using the same one across multiple accounts. The equity rolldown is not intended as a benchmark for individual investors; rather, it is a range of equity allocations that may be appropriate for many investors saving for retirement and retiring at age 65.
Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.
Guidance provided by Fidelity is educational in nature, is not individualized, and is not intended to serve as the primary or sole basis for your investment or tax-planning decisions.
It is your responsibility to select and monitor your investments to make sure they continue to reflect your financial situation, risk tolerance, and time horizon. Most investment professionals suggest that you reexamine your investment strategy at least annually or when your situation changes. In addition, you may want to consult an investment adviser regarding your specific situation.
Before investing in any mutual fund, please carefully consider the investment objectives, risks, charges, and expenses. For this and other information, call or write Fidelity for a free prospectus or, if available, a summary prospectus. Read it carefully before you invest.
Fidelity Brokerage Services LLC, Member NYSE, SIPC
900 Salem Street, Smithfield, RI 02917
Fidelity Investments Institutional Services Company, Inc.
100 Salem St., Smithfield, RI 02917
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