The Use of Professionally Managed Portfolios Projected to Reach 75% by 2021

The use of automatic features has also benefited participants, Vanguard says.

Vanguard expects that the use of professionally managed portfolios, which are currently employed by more than half of its participants today, will reach 75% by 2021. Furthermore, the skyrocketing use of automatic features in the past 10 years has meaningfully benefited participation rates, savings rates and balanced asset allocation strategies, according to Vanguard’s report, “How America Saves 2017.” Ninety-seven percent of participants received a company match in 2016, Vanguard found.

“DC plans have evolved to become a pillar of retirement savings for millions of Americans, and plan sponsors have responded by building plans that encourage employees to participate, save more and invest appropriately,” says Martha King, managing director of Vanguard’s Institutional Investor Group.

Nearly half of plans automatically enroll their workers into their retirement plan—a 300% increase in the past 10 years. Plans that automatically enroll participants report a 90% participation rate. Among plans that automatically enroll and leave that decision up to the participant, 79% of workers participate in their 401(k) plan, a 16% increase from 2007.

In addition, plans that automatically enroll participants at a 4% or higher deferral rate have doubled to 48%, and plans that have an automatic deferral rate of 6% or higher have tripled to 20%. Ninety-seven percent of plans that automatically enroll participants use a target-date fund (TDF) as the qualified default investment alternative (QDIA).

Furthermore, the percentage of participants who are invested exclusively in equities has dropped from 17% in 2007 to 6% in 2016. Also, fewer than 10% of participants made a change to their portfolio last year.

The full, 110-page How America Saves 2017 can be downloaded here.