Why 401(k)s Are Shifting to Younger Set
October 5th 2009 at 2:00pm by Tom Lydon
A new report shows that in the same market environment, the outcome for 401(k) plan participants was far different for the younger contributors than it was for older ones nearing retirement.
According to Sara Hansard for Investment News, account balances for young 401(k) participants rose by huge amount from January 2008 through the middle of this year while the balances for those that have been working for most of their lives declined.
Here are the results of a report by the Employee Benefit Research Institute:
- For 401(k) holders ages 26 to 35 who had accounts for four years or less, balances rose 79.9% since 2007
- For 401(k) holders who have held their accounts for 20 to 29 years, an age range of 55 to 64, balances declined by 8% over the same time period
These results seem to be skewed in that those who have had 401(k) accounts for some time have much larger amounts in their accounts and the impact of new contributions on these accounts are much less than that on newer accounts.
This study further supports the argument that ETFs should be implemented in 401(k)s. The inherent characteristics of these index funds – transparency, intraday trading, tax efficiency and the ability to access hard-to-reach sectors and classes – will enable 401(k) investors to get even more diversified than they currently are and have more control of their retirement portfolios.
View our special report on 401(k) plans for a list of those who offer ETFs within 401(k) plans.
For more stories on retirement, visit our retirement category.
Kevin Grewal contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.