Fidelity Investments expects its retirement assets to continue to increase this year as both employers and employees become more engaged with 401(k) plans.

Beth McHugh, vice president of market insight at Fidelity, expects assets to increase as more employers automatically enroll employees into 401(k) plans and more employers begin utilizing features that allow 401(k) contributions to be automatically increased annually.

"If we can auto increase contributions to 10% or more, we are going to be able to help insure that more employees are really ready for retirement," she said.

McHugh said Fidelity has seen a "huge" increase in employees who want to be "guided" through retirement planning. The usage of Fidelity's online planning tools increased 62% last year from a year earlier, she said. "Employees want more education through tools, advisers, seminars, the Internet and our phone centers," McHugh said. "Advisers need to be encouraging [employees] to take a look at diversification and get them to save the maximum amount."

According to a Fidelity survey, employees who continuously participated in a 401(k) plan for 10 consecutive years increased their account balance nearly 150% to $163,900 as of Dec. 31. McHugh said these investors deferred an average of 10.4% of their salary into their 401(k) plan.

However, she acknowledged that these types of investors are rare. Only 6.9% of Fidelity's 11 million 401(k) participants have maintained continuous participation for the past decade, McHugh said.

The Fidelity survey, which was based on all 401(k) plans managed by the company as of Dec. 31, indicated that 401(k) balances increased 28% to $64,200 last year. McHugh said much of this growth can be attributed to stock market growth; the Standard & Poor's 500 Composite Index rose 26% during the same time period.

The average deferral rate remained relatively flat for the year at about 8.2%, according to Fidelity, but the fourth quarter saw the continuation of a positive trend of more participants electing to increase their deferral rates than decrease them.

There is more good news for employees, McHugh said, "as we are starting to see indicators that employers that stopped matching 401(k) contributions are considering reinstating it. During the last downturn, companies that reduced or suspended 401(k) matches did reinstate the match," she said. "I think this is a good time to think about reinstating it because it will encourage employees and increase deferral rates."

(c) 2010 Money Management Executive and SourceMedia, Inc. All rights reserved.

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