Judging from the actions of the 11 million participants Fidelity Investment serves through their 401(k)s, investors remain faithful about retirement savings.
Despite unprecedented volatility in the capital markets, employees are staying the course in their retirement savings, said Scott B. David, president of workplace investing at Fidelity.
The average amount of money invested per individual in 2008 was $5,600, up slightly from the year before. That helped prop up average balance declines of 27%, to $50,000 from $69,200; the broader market fell 39% in the year.
Hardship withdrawals also continue to rise, but the average amount decreased slightly to $6,000.
Further, Fidelity reported that the number of people making changes to their 401(k) even fell slightly in 2008, to 13.9%, from 14.2% in 2007. That said, investors flooded Fidelitys phone lines with more than 100,000 calls a day during the volatile months of September and October, as the Dow Jones Industrial Average fell below 9,000 for the first time in five years.
In addition, netbenefits.com, the website Fidelity runs for 401(k) participants, had 4.6 million unique visitors in October, 14% higher than a year before and a new record. Of these visitors, nearly one million used at least one of the retirement planning tools available on the site.
Workers engaged with us more in trying to better understand their risk tolerance and an appropriate asset allocation and diversification strategy, David said.
Fidelity also found that due to the popularity of target-date funds, 401(k) investors today are better diversified. Only 16% had 100% of their portfolios in equities in 2008, down from 20% in 2007 and 37% in 2000. And whereas company stock accounted for 20% of the average portfolios assets in 2000, that is now down to 10%.
By the end of 2008, 60% of plans had target-date funds as a default option, up from 38% at the end of 2007 and 5% at the end of 2005. Auto enrollment also rose to 16% in 2008 from 11% in 2007. And companies using auto increases rose to 74% from 70% a year earlier.