Assets in 401(k) plans and other retirement accounts are up 18% from a year ago and have nearly erased losses from the recession as investors continue to pump money into their plans and take advantage of lower prices, according to a report from the Spectrem Group.

Furthermore, investors are more than twice as likely to seek out financial advice than they were a year ago and commonly turn to mutual fund and plan provider websites for information, the report said.

"The retirement market bounced back in 2009, recovering nearly all of the recession-driven losses of the previous year," said Gerald O'Connor, a director at Spectrem. "Average balances were pretty close to where they were before the crisis. Most people said they are still down, but not nearly as much as last year."

Total U.S. retirement assets, including defined contribution and defined benefit plans, rose 18% to $9.3 trillion at the end of 2009, up from $7.9 trillion in 2008, according to a new report from Spectrem titled "Retirement Market Insights 2010."

Defined contribution plans, which hold 49% of all retirement assets, rose 19% to $4.5 trillion, from $3.8 trillion the year before. 401(k)s account for 71% of all defined contribution assets and rose 20% to $2.3 trillion in 2009, up from $1.9 trillion in 2008.

O'Connor said the robust growth in these plans fell short of the S&P 500's 26.5% jump during the same period because the S&P 500 is all equities and retirement plans typically have about a third of their assets in stable-value funds, bond funds and target-date funds.

"The popularity of asset allocation funds, including target-date funds, has been growing steadily over the past several years and is expected to continue," Spectrem said. "Their use as qualified default investment alternatives should accelerate this trend."

Approximately 66% of plan participants described their investment approach as considerably more conservative that it was before the 2008 market collapse, and those who made changes to their plans said they moved to a more conservative direction, Spectrem found.

Highlight Tools, Advice

"The number of plan participants seeking advice on how to invest their retirement funds has more than doubled since 2008, suggesting some lingering uncertainty," O'Connor said.

While 26% of participants sought advice in 2008, the number of people who said they would like more advice and assistance with investment decisions surged to 58% in 2009, Spectrem said.

"Participants continue to show an increased desire for advice and assistance with their plan investments," the report said. They are visiting plan websites more frequently than in the past and are looking for answers, analytical tools and worksheets.

Fund companies are taking advantage of this need for advice by providing more tools that offer planning advice, but many participants are unaware of tools and information available to them.

O'Connor said plan providers and employers need to do a better job of making participants aware that this information is available.

Employers say they are making employee communication a high priority this year and plan to address topics including weathering the markets through proper diversification, staying the course, investing for the long-term and the benefits of regular portfolio rebalancing, according to a new survey titled "Hot Topics in Retirement" by Hewitt Associates.

"Increasingly, employers are offering services and tools to help employees make investment and savings decisions," Hewitt said. "Online investment guidance and advice are projected to grow substantially during 2010, with 42% of respondents planning to adopt guidance and 34% adding advice."

Approximately 59% of defined contribution plans already offer automatic enrollment of new employees, and of the plans that don't, 12% said they are very likely to implement auto enrollment this year, Hewitt said.

In regards to risk management in 2010, the Hewitt report said DC plan sponsors are likely to increase the amount of participant communication surrounding their various investments and fund fees, review their plan governance structure and benchmark their plan administration procedures.

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

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