Data & Research November 19, 2009

Americans Vow to Improve Finances in 2010

With Hispanic and black Americans leading the way, surveyed consumers resolve to save and invest more in the New Year.

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A news release from TD AMERITRADE about its annual New Year’s Resolution poll said 75% of respondents promised that at least one of their 2010 resolutions will be related to being a better saver/investor. Overall, 27% of respondents resolve to start or build on retirement savings compared to 21% in 2009.

TD AMERITRADE said a total of 56% of Hispanics and blacks reported they are more likely to make a resolution about personal finances in 2010 than they were in 2009, compared to 32% of whites who said the same thing.

The survey also revealed an increase in the number of women who plan to save more money this year: 66%, up from 60% last year. Fifty-nine percent of male respondents said they plan to save more money, representing no change from last year.

Additionally, 52% of young Americans (ages 18 to 34) are likely to make a New Year’s resolution about personal finances in 2010—more than any other age group.

Better Financial Plan

TD AMERITRADE said many Americans insisted they have greater financial planning ambition for 2010.  Specifically, according to the survey results:

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  • 22% of respondents plan to start or build an investment portfolio, such as stocks or mutual funds, compared to 13% in 2009;
  • 38% of Hispanics resolved to start or build an investment portfolio, such as stocks or mutual funds in 2010, compared to 10% who resolved to do the same in 2009;
  • 43% of blacks resolved to start or build an investment portfolio, such as stocks or mutual funds in 2010, compared to 26% who resolved to do the same in 2009.

“Perhaps we’re seeing signs of the lessons learned from a struggling economy. Investor confidence took a hit during the recession, but rather than feeling discouraged, people are using this as motivation to get on track and be better prepared for the future,” said Diane Young, director, retirement and goal planning, TD AMERITRADE.

Data & Research November 19, 2009

Fidelity Says 401(k) Match is Coming Back

Fidelity reported that more than a fourth of companies that cut their 401(k) match are now reinstating the match programs as the economy shows signs of recovery.

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A Fidelity analysis of employer and employee actions during the third quarter of 2009 in defined contribution plans it recordkeeps revealed that of the 8% of companies that either reduced or suspended their company match earlier this year, 27% have already reinstated the match or plan to in 2010. The trend is especially true among larger plans of 5,000 participants or more, with 44% of those employers having already reinstated their match or planning to in the next year.

Fidelity said a review of deferral rates in the first quarter of 2009 showed that in plans where the company match was suspended, participants were nearly twice as likely to decrease their deferral rates. In Fidelity recordkept plans with a company match suspension, 11% of active participants decreased their deferral rates versus only 6% of active participants in plans where there were no changes made to the company matches during the same period.

The Fidelity review also found that as equity markets continued to rally in the third quarter, the average 401(k) account balance rose nearly 13% to $60,700 from the end of quarter two, and increased 28% from the end of the first quarter low of $47,500. The two consecutive quarters of gains in the equity markets also had a positive impact on the longer-term investment returns for 401(k) participants.

Using a personal rate of return (PRR) based on a calculation of an account’s investment time-weighted performance during a given period of time—excluding contributions, withdrawals, loans, and certain other types of account activity made either by the participant or plan sponsor—Fidelity found that as of September 30, the median one-year PRR for participants was a positive 0.4%. Over the past five and 10 years, participants had annualized median PRRs of 3.2% and 1.9%, respectively.

The Fidelity data is based on accounts of more than 11 million participants in more than 17,000 plans.

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