Data and Research

TDFs Have Helped Many Ride Out Tough Markets

Fidelity recommends that individuals regularly monitor their mix of stocks, bonds and cash in their 401(k), but not make changes driven by short-term market volatility or other economic events.

By John Manganaro editors@plansponsor.com | November 02, 2016
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A new 401(k)-focused survey report from Fidelity Investments shows solid gains for investors who have stayed in the markets consistently over the last 15 years, as well as a marked improvement in the way retirement investors use target-date funds (TDFs).

The analysis shows savers who have been in their company’s 401(k) plan for 15 years straight have an average balance of $331,200, as of the end of Q3. In 2001, these individuals had an average account balance of about $43,900, Fidelity notes, “which illustrates how a consistent focus on savings can deliver long-term benefits.”

Target-date funds have clearly helped keep participants on track over this time period, Fidelity says—especially since 2006 and thanks to the significant momentum gained by TDFs in the wake of the Pension Protection Act. Fidelity recommends that people regularly monitor their mix of stocks, bonds and cash in their 401(k), but not make changes driven by short-term market volatility or other economic events.

“Despite recent market volatility, the percentage of 401(k) savers who changed their asset allocation dropped to 7.4%, the lowest rate ever and down from 8.5% a year ago,” the report explains. “One reason for this trend is that more people are saving all of their 401(k) assets in a target-date fund. At the end of Q3, 44% of Fidelity’s 401(k) savers had all their 401(k) savings in a target-date fund, up from 41% a year ago.”

NEXT: Stressing a long-term approach 

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