Gen Y Most Properly Allocated 401(k) Participants

By Rebecca Moore | August 02, 2012
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August 2, 2012 ( – A higher rate of selection of target-date funds by Gen Y 401(k) participants (those born between 1979 and 1991) makes them the most properly allocated, Fidelity found.

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.”