Investors See Benefits of ETFs in 401(k) Plans

September 29, 2008 at 11:00 am by Tom Lydon

Retirement ETFs 401(k) Investors who seek their own retirement plans and or manage their own 401(k)s are increasingly choosing exchange traded funds (ETFs) as their investments of choice.

Lisa Shidler for Investment News explains that self-directed accounts allow investors to buy a range of equities and other securities, which many investors find appealing. Individual participants are clamoring to get ETFs into 401(k) plans. IRAs are also a viable option into which investors can add ETFs.

ETFs now make up 22% of retirement assets within brokerage accounts at The Charles Schwab Corp. of San Francisco, which is up from 20% on June 30, 2007. At The Vanguard Group Inc., about 10% of participants hold ETFs through brokerage accounts in their 401(k) plans, up from about 6% since 2006. And the level of interest of smaller 401(k) plans to use ETFs has been growing as well.

There are still some kinks to be ironed out when tailoring ETFs to fit into retirement plans, and when they do, mutual funds will have stiff competition.

Tags: 401(k)