Assets invested in “guided solutions” (model portfolios and target-date funds combined) have spiked from a little over 17 percent in 2011 to more than 26 percent in 2014. It’s one finding shared by retirement plan giant Ascensus with retirement plan advisors at its Plan On! Conference, held last week in Colorado Springs, Colo.
The company cited Morningstar’s year-end data, which notes 80 percent of employees who were automatically enrolled in a managed account continued to use managed accounts after two years. Further, 86 percent of employees invested in managed accounts were properly diversified based on their age and risk tolerance.
Ascensus also identified the following trends:
- Employer matches are becoming more customary. Fifty-five percent of employers funded a match in 2014, a jump from 52 percent who provided a match in 2013. As more plans fund a match, it signals a shift in employer dedication to enhancing benefit offerings. It also points to an improved confidence in the economy, as more companies can invest in their employees’ retirement.
- Automatic features continue to drive plan participation. By the end of 2014, 18 percent of plans utilized automatic enrollment, a three percentage point jump from 2013. Additionally, automatic enrollment has a striking impact on participation rates. Plans in which employees are automatically enrolled have participation rates that are 14 percentage points higher than those for plans without automatic enrollment. When coupled with an automatic increase option, automatic enrollment is even more impactful, with an average participation rate that is 23 percentage points higher than plans that do not offer automatic enrollment.
- Technology plays an important role in the participant experience. Technological advances and more widespread access to digital features have created a new user experience for employees. Currently, 85 percent of new enrollees sign up online, signaling a clear shift to digital. Employees are also taking advantage of online tools, such as the Ascensus retirement calculator, to determine their retirement readiness. Nearly 18 percent of calculator users increased their savings percentage after use, and 37 percent of employees who were not saving in their plan started contributing after using the calculator.
See Also:
- Alarming Percentage of Americans Have Less Than $25,000 Saved for Retirement
- 401(k) Assets Make Big Jump (But Will It Hold?)
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
