Fidelity Study Shows 401(k) Investments Reach Five-Year High

August 4, 2005 ( - Fidelity's annual study on the state of its 401(k) plans, Building Futures, shows that average participant balances in 2004 were the highest since 1999 at $61,000.

Average plan participation rates were unchanged from 2003, with 66% of eligible workers contributing to their companies’ plans in 2004, according to a Fidelity news release. The average deferral rate also remained steady at 7%.

The study found that participants seem to be allocating their assets appropriately since 83% of assets for participants in their 30’s were invested in equities and 41% of assets for participants in their 70’s were in equities. However, diversification of assets may be of concern. Twenty seven percent of participants in their 30’s hold all of their assets in equities and 12% have no assets in equities. Among all participants 24% have all assets in equities and 14% have no assets in equities.

Additional highlights of the study include:

  • 52% of continuous plans increased their number of investment options during 2004
  • The average number of plan investment options is 20
  • More than 20% of participants continue to hold all assets in just one investment option which is not a lifestyle of blended fund
  • The more investment options participant assets are held in, the less volatility experienced in investment returns
  • Plans offering Fidelity Freedom Funds, Fidelity’s lifecycle funds that offer diversification based on age, increased to 78% from 72% in 2003, and the number of participants with assets in Freedom Funds is more than 20%

Building Futuresis an analysis of nearly 8.6 million participants in approximately 10,800 defined contribution plans serviced by Fidelity as of the end of 2004.