Despite recent equity market highs, 401(k) plan participants still hold a significantly smaller share of their tax-deferred savings in equities than they did before the 2008 meltdown, according to the Spectrem Group’s Retirement Market Insights Report 2013.
Equity exposure has dropped by 10 percentage points. In 2012, 401(k) participants held 36% of their assets in diversified equities and another 13% in company stock. In 2006, these investors had 40% of their assets in diversified stocks and 19% in company stock.
Investors are taking more risk with their retirement funds than they did in 2008, however, when 401(k) plan participants held just 29% of their assets in equities and 13% in company stock.
Similarly, 401(k) participants just held 21% of their total in money market funds in 2012 versus 32% in 2008. But they still are keeping more funds liquid than in 2006, when just 16% of their assets were invested in money market funds.
Nearly half, or 46%, of plan participants who are age 55 to 64 say their household is not saving enough to meet their financial goals, Spectrem found. Just 35% of participants in that age group expect to retire comfortably.
The Spectrem report showed the concentration of assets and participants of the 401(k) industry in the largest plans. For instance, 40% of the participants (20.2 million) and almost half of the assets ($1.44 trillion) are in the approximately 1,500 plans that have 5,000 or more participants.
At the other extreme, 14% of the participants (7.2 million) and about 11% of the assets ($310 billion) are in the 489,000 plans that have fewer than 50 participants.
Other insights from the report include:
• Both private and public defined contribution plans continue to outperform private and public defined benefit plans.
• Private sector defined contribution plans, aided by ongoing employee contributions, have surpassed the previous peak in 2007.
• Total U.S. retirement assets grew to $16.3 trillion by year-end 2012 from $15.1 trillion at the end of 2007.
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