The Markets April 13, 2010

Vanguard Reports Uptick in Target-Date Funds

A new Vanguard study reports a significant increase in the use of target-date funds in retirement plans.
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In 2009, 75% of defined contribution plans at Vanguard offered a target-date fund, up from 13% in 2004, and 42% of the participants in those plans invested in the funds. Of those 42% participants, Vanguard estimates that half chose the funds voluntarily rather than being placed in them as a default investment.  

Of all plans at Vanguard that have designated a qualified default investment alternative (QDIA ), 80% had chosen target-date funds as the default. In addition, 21% of Vanguard plans have adopted automatic enrollment—quadruple the number since the end of 2005—and nine in 10 plans with automatic enrollment are using target-date funds as their designated default fund. 

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The report, “Target-Date Fund Adoption in 2009,” analyzed 3.2 million participants holding 3.4 million accounts in 2,200 defined contribution plans administered by Vanguard. 

Data & Research April 13, 2010

More Retirement Plan Participants Want Investment Advice

Even as retirement savings accounts are back on a growth curve, retirement plan participants are more interested in receiving advice about investing their retirement funds, a new report suggests.
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In fact, the number of retirement plan participants seeking advice about how to invest their retirement funds has more than doubled since 2008, according to a Spectrem Group report. More than half (58%) of retirement plan participants would like more advice and assistance with investment decisions, up from 26% the prior year.

The report also found that Americans’ retirement savings accounts are recovering from their lows during the economic downturn. Total U.S. retirement assets, which include both defined contribution (DC) and defined benefit plans, rose 18% to $9.3 trillion in 2009, up from $7.9 trillion in 2008.

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Assets held in DC plans rose 19% to $4.5 trillion, up from $3.8 trillion the year before.  As a percentage of all retirement assets, DC plans held steady at 49%. By themselves, 401(k)s, which account for 71% of all DC assets, rose 20% to $2.3 trillion in 2009, up from $1.9 trillion in 2008.

“The retirement market bounced back in 2009, recovering nearly all of the recession-driven losses of the previous year,” said Gerald O’Connor, a director at Spectrem Group, in a news release.

The Spectrem report, “Retirement Market Insights 2010,” is based on data derived from both public and private sources as well as Spectrem surveys. 

Information about purchasing the report is available at www.spectrem.com.

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