Many Participants in the Dark on Their Allocations

Twenty-two percent do not know how their assets are invested, Legg Mason found in a survey.

Twenty-two percent of retirement plan participants do not know how their assets are allocated, Legg Mason learned in a survey. This jumps to 34% of Baby Boomers but declines to 11% of Millennials.

Among those who do know how their assets are allocated, they put 51% in equities, 15% in fixed income, 12% in cash, 11% in target-date funds (TDFs) and 10% in commodities.

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“It is surprising to see employed Baby Boomers with substantially higher allocations to equities in retirement accounts (60%) compared to their other, non-401(k) accounts (34%),” says Adam Petryk, president of Legg Mason affiliate QS Investors. “In general, as individuals get closer to retirement, their portfolios are more vulnerable to market volatility, as they have less time to recover from a large downturn. Boomers may be making large allocations to equities in order to reach their retirement goals, but in doing so are not protecting the capital already accumulated from a potential market shock.”

Petryk adds that he finds it surprising that Millennials have only an average of 43% of their portfolios in equities. Millennials also have 17% of their portfolios in fixed income, 13% in cash, 12% in TDFs, and 14% in commodities.

“Since Millennials have a longer savings horizon until reaching retirement, one would expect them to hold a greater allocation to equities compared to Baby Boomers,” he adds. “Younger investors have the luxury of time and, therefore, can afford higher equity exposure to grow their portfolios.”

Asked about various innovative retirement investment strategies, 86% of participants said they would invest in a product that primarily delivered the potential for greater growth in positive markets. Eighty-three percent would invest in a product that primarily provided protection in a down market, and 81% said they would opt for one that provided greater diversification.

Asked what they would do with a $100,000 windfall, 49% said they would save it for retirement, 38% said they would use it for short-term investments, 32% said they would pay off debts other than their mortgage, 22% said they would go on vacation, and 18% would buy a car.

The survey also found that only 31% think they will have enough money saved to enjoy a comfortable life in retirement. The majority (60%) of Millennials are confident. Only 17% of Baby Boomers are equally confident.

If they found that they did not have enough money to retire, 36% said they or their spouse would work longer or participate in the gig economy.

Eighty-six percent said they are focused on long-term goals, such as generating retirement income or leaving an inheritance.

Sixty percent of Millennials and 29% overall said they regretted an emotional decision to sell in a 401(k) plan.

Research Plus Ltd. conducted the online survey among 1,000 investors who plan to invest a minimum of $50,000 over the next 12 months.

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