ETF Trends
ETF Trends

While we’re still waiting for exchange traded funds (ETFs) to become fully incorporated into 401(k) plans everywhere, there are still four pieces of good news about the industry we have to share.

Good News 1: Balances Are Up. The average 401(k) balance is up 13.5% in the second quarter, indicating a lean toward more investors raising their deferral savings rates, according to Fidelity Investments. Money Management Executive for Financial Planning reports that this is a reversal of trend seen in the prior three quarters. Only 1.3% of plan participants lowered their contributions, down from 2.2% in the fourth and first quarters.

Good News 2: Matches Being Restored. The majority of employers plan to restore their 401(k) match programs within the next 18 months, according to Money Management Executive. The survey found that 64% of employers plan to do so; broken down, 5% plan to within the next six months; 43% in the next 12 months and 16% in the next 18. Of those who said they would restore the matches, 67% said they would be back to their previous levels while 21% will tie them to corporate profits.

Good News 3: More Contributions. Employees are starting to boost their contributions to their retirement plans, says Jennifer Levitz at The Wall Street Journal. Fidelity Investments says that while people are paying less than they were a year ago, the number of people increasing their contributions was more than the number who were decreasing them in the second quarter.

Good News 4: ETFs In Plans. Sharebuilder 401(k), a provider of retirement plans for small-plan sponsors, is enhancing its all-ETF 401(k) platform. The 401kPRO program is geared toward businesses with up to 250 employees and is offered through registered investment advisors. The new service uses ETFs as underlying investments, explains Marianna Lehman for Ignites. The 16 ETFs offered include S&P 500 funds and a Treasury Inflation Protected Securities (TIPS) ETF.

This is the push that the ETF industry needs to break into the long-anticipated 401(k) retirement market. There are a few small platforms in this space serving small plans, but the ultimate goal is much bigger.

For more stories about retirement, visit our retirement category.

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.