A growing number of U.S. workers are diversifying their retirement investments, while participation in defined contribution plans keeps increasing also, according to new research released by Principal Financial Group.
Baby boomers, Gen Xers and millennials are all increasingly diversifying their retirement portfolios, the latest “Driving Plan Health” report conducted by Wells Fargo Institutional Retirement and Trust, which was acquired by Principal in 2019, shows.
However, millennials tend to have the most diversified investments of the three generations, followed by Gen X and baby boomers.
The study defined diversified investment solutions as allocations toward an all-in-one choice, including target date funds, managed accounts or model portfolios, or account balances in at least two equity and one fixed income asset class, the firm noted.
Eighty-three percent of millennials invested in defined contribution plans with services by Wells Fargo Institutional Retirement and Trust were invested in diversified portfolios in 2018, up from 77% in 2013, according to the report. In comparison, 80% of Gen Xers were in these portfolios in 2018 vs. 74% in 2013 and 78% of boomers vs. 72% in 2013, it said.
Of those diversified, 63% of millennials had 100% of their funds in a diversified investment solution compared with only 45% of boomers, Principal said.
Boomers, however, are more active in workplace retirement programs than millennials, Principal said. According to the report, 47% of boomers are contributing to a retirement savings account vs. only 30% of millennials and 37% of Gen Xers.
Over the past five years, meanwhile, participation in a defined contribution plan has grown faster than other measures of plan health, Principal said. Participation in a defined contribution plan has grown 12% from 2013, with 65% of individuals taking part in a workplace defined contribution plan, it said.
However, the report indicated that all three key retirement plan health measures — participation, contributions and diversification — made “significant gains” over the past five years. Millennial workers especially seem to be quickly catching up to boomers when it comes to contribution and participation rates, Principal said.