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-- Average Account Balance Was $61,000 At End of 2004 --
BOSTON, August 4, 2005 -- In findings from its annual study on the state of its
401(k) plans, Fidelity Investments today reported that average participant balances are
at their highest since the year 1999, and average plan participation rates have stabilized
after a few years of slight declines.
Data from the sixth edition of Building Futures, a comprehensive analysis of
nearly 8.6 million participants in approximately 10,800 corporate defined contribution
plans serviced by Fidelity at the end of 2004, revealed a 10 percent increase in average
401(k) participant account balances to $61,000, from $55,000 in 2003. Average
workplace plan participation rates remained level with 66 percent of eligible workers
contributing in 2004 and 2003.
"We are encouraged by the key results in this year's report," said Steve
Deschenes, executive vice president, Fidelity Institutional Retirement Services
Company, the nation's largest provider of 401(k) plans. "The data indicate that workers continue to view their 401(k) as a popular retirement savings vehicle, and on average are seeing higher account balances as a result."
Need for Additional Action
While 401(k) plans are helping an increasing number of employees achieve their
retirement goals along with Social Security, pensions and other personal savings,
Fidelity's analysis revealed specific opportunities where American workers could be
doing more. For instance, the findings showed that approximately one-third of eligible
workers have yet to enroll in their workplace plan, and of those who are participating, a
significant number are not saving at rates considered adequate to drive retirement
readiness.
"The average 401(k) deferral rate remained steady over the past twelve months
at about 7 percent," said Deschenes. "This is a good start, but in an environment where
retirement-related expenses are continuing to increase, workers who plan to rely on
their 401(k) as their primary source of retirement income need to be saving more."
A similar assessment of asset allocation also indicated opportunities for
improvement. The average participant appears to be allocating assets appropriately,
with individuals in their 30s holding 83 percent of their assets in equities and those in
their 70s holding 41 percent of their assets in equity investments. However, when
viewed at the individual level, the data showed that a significant number of participants may not have an appropriate exposure to equities. For example, 27 percent
of participants in their 30's hold 100 percent of their assets in equities, and 12 percent
hold no equities in their portfolios. While diversification and asset allocation do not
ensure a profit or guarantee against loss, this typically would not provide them with
appropriate asset allocation to effectively pursue long-term gains and mitigate risk.
"Next to your contribution rate, maintaining an appropriate asset allocation is
one of the most critical factors contributing to 401(k) success," said Deschenes.
"Participants who are at these extremes may not be well positioned to take advantage of
market growth or weather volatility. Plan sponsors, whether they work directly with a
firm like Fidelity or an advisor, can help employees overcome this tendency by
educating them about the role asset allocation plays in achieving their retirement
savings goals, and providing a variety of plan options and services, such as automatic
rebalance, life-cycle funds or managed accounts, that can help automate the process."
In 2004, the number of plans offering Fidelity Freedom Funds -- Fidelity's
lifecycle investment products that provide age-appropriate diversification within a
single 'fund of funds' -- increased to 78 percent from 72 percent in 2003, continuing a
notable trend since the funds' introduction in 1996. As well, the number of participants
in plans offering Freedom Funds who held them rose to one in five, or 1.2 million
participants, from approximately 1 million in 2003. (Note: These funds are subject to the volatility of the financial markets in the U.S. and abroad and may be subject to the
additional risks associated with investing in high yield, small cap and foreign
securities.)
Smart Moves Can Help Drive Retirement Readiness
Fidelity's newest Retirement Benefits Insights brief, "Ten Smart Moves for Plan
Sponsors," also released today, details a number of actions that employers can take to
help increase plan participation and usage; improve participants' asset allocation; and
drive employee actions and results. These actions include:
"Today's employers have an unprecedented set of tools and resources at their
fingertips to help improve employees' retirement readiness," said Deschenes. "It's crucial that plan sponsors gain insight from their provider or an advisor into the
evolving needs of their participants and provide them with a combination of features
that drives them to take action."
About Fidelity Employer Services Company
Fidelity Employer Services Company provides benefits and human resources
administration, workforce effectiveness, payroll solutions and stock plan services to
over 19 million employees in the U.S. as of June 30, 2005.
About Fidelity Investments Institutional Services Company
Fidelity Investments Institutional Services Company provides defined
contribution plan administration, employee education and investment management
services through investment professionals to more than 1900 plan sponsors as of June
30, 2005. For more information, advisors can visit http://advisor.fidelity.com.
About Fidelity Investments
Fidelity Investments is one of the world's largest providers of financial services, with
custodied assets of $2.2 trillion, including managed assets of $1.1 trillion as of June 30,
2005. Fidelity offers investment management, retirement planning, brokerage, and
human resources and benefits outsourcing services to approximately 20 million
individuals and institutions as well as through 5,500 financial intermediary firms. The
firm is the largest mutual fund company in the United States, the No. 1 provider of
workplace retirement savings plans, one of the largest mutual fund supermarkets and a
leading online brokerage firm. For more information about Fidelity Investments, visit
www.Fidelity.com.
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Before investing in any mutual fund, please carefully consider the investment objectives, risks,
charges and expenses. For this and other information, call or write Fidelity for a free prospectus.
Read it carefully before you invest.
Investing involves risk. The value of your investment will fluctuate over time and you
may gain or lose money.
Fidelity Investments Institutional Services Company, Inc.,
82 Devonshire Street, Boston, MA 02109
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