August 02, 2012
--- A higher selection
rate of target-date funds makes Gen Y 401(k) participants (those born between
1979 and 1991) the most properly allocated, Fidelity found. ---
Fidelity’s second-quarter analysis of its 11.9 million
401(k) accounts shows that across all 401(k) participants, 45% are within +/-
10 percentage points of the Fidelity Freedom Fund equity rolldown schedule, 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%.
Many Gen Y participants 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%) of Gen Y participants have all their assets in a
target-date fund, compared with 30% of participants of all ages in plans that
offer target-date funds.
In addition, Fidelity’s analysis found that in plans that
offer Roth 401(k), usage of the savings option is greatest among Gen Y
participants, with 8.8% contributing to them versus 5.8% among all active
participants.
“Trends
we are seeing among our more than two million Gen Y participants are
particularly exciting,” said James M. MacDonald, president, Workplace
Investing, Fidelity Investments. “They are starting off with better diversified
portfolios than previous generations, which can have a positive impact over the
long term.”