Vanguard released a report entitled “How America Saves in 2010” based on trends they are experiencing from their 401k retirement plan clients through the 2009 plan year. Vanguard serves approximately 1,700 plan sponsors and 3 million participants.
Key findings of the Vanguard “How America Saves” survey:
- 25% of participants use an asset allocation option (including target date, risk based, and balanced portfolios) as their single investment option.
- About 75% of all plans use target date options in their plan, versus only about 30% in 2005.
- Use of automatic enrollment has remained largely unchanged at about 43% of all plans.
- About 1/3 of plans offer a Roth feature with only about 8% of participants using it for their own account.
- Average account balances rose about 23% in 2009. Interestingly enough, balances at the end of 2009 had risen higher than in September 2007, which was just prior to the October 2007 market peak. Some of this was attributed to contributions as well as market growth.
- Through 2009, in-service withdrawals, such as plan hardships, were up slightly, but still only utilized by less than 2% of participants.
- In 2009 about 92% of assets eligible for distribution were “preserved” (kept in some type of retirement vehicle), while only 8% were distributed in cash.
The news that over 90% of rollover assets were kept for retirement is especially encouraging. Plan sponsors know that participants need to be be responsible for their retirement savings. This survey demonstrates the importance of good plan design (target date options, automatic enrollment, Roth feature) combined with ongoing participant education.