February 10, 2012

Average 401(k) Contribution Increased in 2011: Fidelity

Employees, more employers contributing to plans

The average employee contribution to a 401(k) plan rose slightly in 2011, Fidelity Investments reported Thursday. The average contribution increased to $5,750, up from $5,680, due to participants electing an average 8% deferral rate, according to Fidelity.

“It’s very encouraging that savings levels actually held up during the intense market volatility of last year and a sluggish economic environment,” James MacDonald, president of workplace investing for Fidelity Investments, said in a statement. “Increases in savings levels, however small, can make a significant impact over time.”

Fidelity surveyed over 11 million 401(k) participants in Fidelity plans for the report.

Employers are contributing more too. Eighty-two percent of workers who actively participate in their plan received a contribution from their employer, up from 79% in 2010. The average employer contribution rose to $3,270 from $3,170.

Target-date funds did their part to improve diversification and asset allocation, especially among young workers. One-quarter of all participants invested all of their 401(k) assets in a TDF. The report found the majority of plans (98%) offer age-based TDFs; still, among people who declined to invest in their age-appropriate TDF and had been in the plan for 10 years, 62% had portfolios that underperformed the appropriate TDF.

Fidelity asked survey respondents if they transferred money from one investment to another in 2011 and found just 10% had done so. “Much of the reduction in exchanges may be attributed to the increased use of target date funds and an appreciation of a long-term, steady approach to retirement saving,” according to the report. The past few quarters, Fidelity noted, has seen investors make these exchanges by moving away from equities into short-term, stable value and fixed income investments. 

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