Principal Preservation Still a Focus for Plan Participants

In a recent analysis of its client base, New York Life Retirement Plan Services found that despite a low interest rate environment, principal preservation investment solutions remain a heavily utilized retirement plan investment option.

Since the financial crisis of 2008, on average, more than 20% of retirement assets have been invested in stable value investments and half of all participants across New York Life’s retirement platform have some 401(k) savings within a stable value investment today.  

The reliance on stable value is not attributed solely to an aging population that wants to shelter their retirement savings from the marketplace. Significant stable value usage spans all age ranges. On average, Baby Boomers—participants between 49 and 66 years of age—allocate 22% of their assets in stable value, compared with 12% for Gen X participants (between 33 and 48 years of age) and 10% for Gen Y (between 23 and 32).   

In addition, half of all participants invested at least a portion of their defined contribution balances to stable value in 2011, according to the analysis. Baby Boomers had the highest rates of stable value use, at 58%, followed by Gen X at 46% and Gen Y at 32%. New York Life says the data is significant, given that participants are not automatically defaulted into a stable value investment, but must proactively place assets there.  

“Gen Y has not experienced a positive market cycle during their professional careers, and Baby Boomers just watched a good portion of their retirement erode in rough market conditions,” said Steven Dorval, managing director of retirement and investment strategy at New York Life Retirement Plan Services. “All participants require an investment option that will preserve principal, and at a minimum keep up with inflation. These are among the reasons stable value continues to be a core savings option.”