Fidelity’s second quarter analysis of its 11.9 million 401(k) accounts shows that across all 401(k) participants, 45% are within +/- 10 percentage points of the Fidelity Freedom Fund equity rolldown schedule, a gauge the company uses to determine an age-based asset allocation that may be appropriate. But for Gen Y participants, that number jumps to 67%.
Many Gen Y participants have achieved diversification through the adoption of target-date funds, which are often the default option for plans with auto enrollment. Among plans that offer target-date funds as investment options, half (51%) of Gen Y participants have all of their assets in a target-date fund compared to 30% of participants of all ages in plans that offer target-date funds.
In addition, Fidelity’s analysis found that in plans that offer Roth 401(k), usage of the savings option is greatest among Gen Y participants, with 8.8% contributing to them versus 5.8% among all active participants. “Trends we are seeing among our more than two million Gen Y participants are particularly exciting," said James M. MacDonald, president, Workplace Investing, Fidelity Investments. "They are starting off with better diversified portfolios than previous generations, which can have a positive impact over the long term.”