Vanguard study finds employers, employees improving retirement plan behaviors

Automatic enrollment now standard at 48% of company's plans, up from 20% a decade ago

Jun 11, 2019 @ 12:26 pm

By InvestmentNews

Employers are improving the design of their retirement plans and employees increasingly are adopting prudent investing practices, according to a report from Vanguard.

(More:Vanguard share of target-date fund market becoming 'obscene')

The report noted that 48% of Vanguard plans at the end of 2018 featured automatic enrollment and 66% of new plan entrants were enrolled via automatic enrollment. This compares with 46% of plans that featured automatic enrollment last year, and just 20% of plans that offered it in 2008.

Including employee and employer contributions, the average 15-year total participant contribution rate in 2018 was 10.6% and the median was 9.8%, the report found. Two-thirds of auto-enrollment plans have implemented automatic deferral rate increases.

Vanguard said that at year-end 2018, 52% of all participants were invested in a single target-date fund; another 3% held one other balanced fund; and 4% used a managed account program. The use of target-date funds has resulted in fewer than one in 10 participants holding an extreme position, such as 100% in equities (6% of participants) or no equities (3% of participants).

(More:2019 may finally bring progress on retirement legislation)

Other findings: only 8% of participants make one or more portfolio trades or exchanges annually; the number of participants holding a concentrated position in company stock (more than 20% of their account balance) fell to 19% in 2018 from 30% in 2009; and the majority of participants (81%) who were eligible to take their account as a distribution due to a separation either remained in the plan or rolled over their savings to an IRA or a new employer plan.

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