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Monday, November 22, 2010

401k Participants Embraced Target-Date Funds in 2009

by: Hung Tran

A new study by the Employee Benefit Research Institute and the Investment Company Institute says that 401(k) participants continued to seek diversification of their investments in 2009.

In fact, the study says that the share of 401(k) accounts invested in company stock continued to shrink, falling by half of a percentage point to 9.2 percent in 2009, continuing a steady decline that started in 1999.

On average, at year-end 2009, 60 percent of 401(k) participants’ assets were invested in equity securities through equity funds, the equity portion of balanced funds, and company stock. Thirty-six percent were in fixed-income securities such as stable value investments and bond and money funds.

At year-end 2009, nearly 10 percent of the assets in the EBRI/ICI 401(k) database was invested in target-date funds and 33 percent of 401(k) participants held target-date funds.

“401(k) participants continued to embrace target-date fund investing in 2009,” stated Jack VanDerhei, EBRI director of research. “Although target-date funds represent only one-tenth of 401(k) assets, the data highlight the significant role that they play in individual participants’ accounts, particularly recently hired and younger employees who are increasingly using target-date funds to save for retirement.” 

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