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.

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