Summary
CONSISTENT TDF PARTICIPANTS: This study examines the use of target-date funds (TDFs) by a consistent group of 401(k) participants in plans that offered them in 2007 through 2009. The consistent group of participants were those who were in a plan that offered a TDF in 2007, were in plans that were still offering TDFs in 2008 and 2009, and were still in the data source in 2008 and 2009.
DATA SOURCE: This study uses the unique richness of the data in the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project, which for each year from 2007-2009 had more than 20 million 401(k) plan participants from more than 50,000 plans across a spectrum of plan administrators. In this database in 2007, 67.3 percent of the plans offered target-date funds as an investment option. This study follows those 401(k) participants identified as being in plans that offered target-date funds in 2007 and remained in the database, if they continued to be in a plan offering target-date funds in 2008 and 2009.
USE OF TDFS IN EACH YEAR: In 2007, of those participants in this database, 38.9 percent had at least some of their account balance in TDFs. By 2008, 42.6 percent had at least some of their account balance in TDFs, reaching 43.2 percent in 2009. Furthermore, 36.6 percent of this consistent group of 401(k) plan participants had some of their account balance allocated to TDFs in 2007 and 2008. Just over 35 percent of these participants had at least some assets allocated to TDFs in 2007, 2008, and 2009.
AUTO-ENROLLMENT AND PERSISTENCE OF TDF USE: Among participants who were identified as auto-enrollees in 2007, 97.2 percent were still using TDFs in 2008, and 95.7 percent used them in 2008 and 2009. While those not identified as auto-enrollees continued to invest in TDFs at a lower rate than those identified as auto-enrollees, there was a very high overall persistence rate in TDF use from 2007?2009: just over 90 percent.
ALL-ACCOUNT USE VS. PARTIAL-ACCOUNT USE: Of the consistent group of participants using TDFs in 2007, 36.9 percent had all of their account allocated to TDFs. The remaining 63.1 percent of those using a TDF had less than 100 percent of their allocation in TDFs. In 2009, slightly more participants (67.2 percent) had less than 100 percent of their allocation in TDFs.
PERSISTENCE OF USE FOR 100 PERCENT TDF PARTICIPANTS: Among only those participants who had all of their account allocated to TDFs, a very high rate (83.0 percent) stayed at a 100 percent TDF allocation in 2009. Almost 13 percent of those who had a total allocation to TDFs in 2007 had an allocation lower than 100 percent (but not a zero) allocation in 2009. Only 4 percent of participants with a 100 percent TDF allocation in 2007 had stopped using them by 2009.
ALLOCATION WHEN NOT INVESTING IN ALL-TDFS AFTER DOING SO: While a very small percentage of those investing all of their account in TDFs in 2007 stopped using them by 2009, the average participant-weighted allocation for this group to equity funds/company stock/balanced funds in 2009 was 31.1 percent and approximately 65 percent to bond funds, money funds, guaranteed investment contracts (GICs), and/or stable value funds in 2009.