A six-year bull market has boosted retirement accounts--and that's what worries one of the nation's largest providers of 401(k) plans.

(Bloomberg Business) — Six years of a bull market in U.S. stocks have done great things for many retirement accounts. And that’s what worries one of the nation’s largest providers of 401(k) retirement savings plans. 

Those stock gains mean older workers may have more equity risk in their portfolio than they realize, and more than recommended for their age, according to Fidelity Investments. The company, which administers 401(k) plans in the U.S. for 21,661 employers with 13.4 million participants, found 27 percent of plan participants from age 55 to 59 years old with stock allocations at least 10 percentage points higher than what it recommends. For those between the ages of 50 and 54, the percentage whose portfolios were judged out of whack was 18 percent. 

Part of the concern is that a long rise in the stock market “gives this false sense of continued prosperity,” said Douglas Fisher, senior vice president of workplace retirement policy at Fidelity. It brings about “this wealth effect that happened with our homes before 2008, when we felt like we could use the home as an ATM,” he said. “It’s happened a little in the 401(k) market, where people are taking out more loans, and taking money out just because of the increase in the market.”

Fidelity’s measure of how much stock is appropriate by age is tied to the “glide path” of its target date funds. That’s the term for the transition in asset allocation from a more aggressive, stock-heavy portfolio to a more conservative, bond- laden portfolio as someone nears retirement age. For someone who wants to retire in 17 years, buying Fidelity’s 2030 Freedom Fund at age 50 would mean a starting stock allocation of 84 percent, with 59 percent in U.S. stocks and 25 percent in international stocks. For a 59-year-old wanting to retire at age 67, Fidelity’s 2025 fund starts off with 70 percent in stocks, with 49 percent U.S. and 21 percent international.

Some people who seem misallocated could be less equity- heavy than they appear because of assets held outside 401(k) retirement plans. Rob Austin, director of retirement research at Aon Hewitt, notes that some with defined-benefit, or traditional, pension plans view them as a sort of fixed-income asset that allows them to take more stock market risk. If they own a home, they may view it in a similar way, he said. Jack VanDerhei, of the Employee Benefit Research Institute, said most people keep their retirement money solely in a 401(k).

Anecdotally, Austin hears some concern from employers that so few individuals are rebalancing their portfolios or making trades. Rebalancing no more than once a quarter and no less than once a year is a rule of thumb. But employers don’t want to be seen as giving advice, he said. Employers that partner with firms that have a fiduciary duty to plan participants may suggest employees do a quick check of their asset allocation on the partner’s website to see if they are on track. 

Fidelity said it joined with thousands of the employers it manages 401(k)s for in a campaign that began in early July, targeting six million plan participants whose stock allocation was deemed out of whack. Stock market volatility last year got Fidelity thinking about lessons that came out of the stock market turmoil of 2008 and 2009, Fisher said, and the need to contact people nearing retirement about their asset mix. So far, more than half of the 50,000-plus people who responded to the campaign have done something to address their asset allocation, though that could mean just checking it, rather than changing it.

Fidelity released the data about outsize stock allocations as part of its quarterly analysis of the 401(k) and IRA accounts it administers. It found that average account balances dipped in the second quarter and stood about where they were at the end of 2014, at $91,000. Overall, average 12-month total contribution rates, which include money that employees and employers put in, rose above $10,000 for the first time, and the average loan amount rose to $9,720 from $9,500 a year ago.

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