According to upcoming research from the Spectrem Group, the average investment return on 401(k) balances will be a negative 4%. However, due to annual contributions averaging 8%, and company matches there is still a good chance that most participants will see an overall increase in their 2000 account balance.
The Spectrem Group research suggests that a third of 401(k) participants have been in their plans for five years or less, and thus have never had to deal with a down market. In fact, the study suggests that participants may have already begun preparing, backing off from equity investments.
The 2000 study found that participants on average had a 70/30 investment split between stocks and bonds, down from an 80% allocation to stocks in 1998. However, some of that movement may be the result of a downturn in the value of the underlying stock investments.
Participant respondents also noted:
- an average of 9 investment options, though they used only 3.5 of them
- 30% of participants went online to company web sites for plan information and transactions, up from 20% in 1998
- 15% of participants had performed plan transactions on the Internet, up from just 2% just two years ago.