Vanguard, a large turnkey 401(k) plan provider, recentlydocumented trends among its millions of defined contribution (DC)plan participants in an informative report: The great recession and 401(k) plan participant behavior.
|One interesting finding: 22 percent ofVanguard’s 2010 DC plan contributions went into target-date funds,up from just 4 percent in 2006.
|Most of this growth is due to automatic enrollment arrangementswith target-date funds as the default choice. Unless participantsactively choose investments, the default choice is automaticallyassigned to receive contributions. In other words, inertia makesthe decisions.
|When you find that clients or prospects who have automaticallydefaulted into target-date funds, ask them if they are evaluatingthe cost of inertia, and offer to help. By monitoring target-datefund performance and comparing it to other plan investment choices,you can help participants increase personal control over planinvestment strategies.
Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.
Your access to unlimited BenefitsPRO content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Critical BenefitsPRO information including cutting edge post-reform success strategies, access to educational webcasts and videos, resources from industry leaders, and informative Newsletters.
- Exclusive discounts on ALM, BenefitsPRO magazine and BenefitsPRO.com events
- Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com
Already have an account? Sign In
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
