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Investing January 15, 2001
Participants Brace for 401(k) Statement "Shock"
January 15, 2001 (PLANSPONSOR.com) - Plan sponsors
might want to begin preparing for a severe case of "statement
shock" as the nation's 32 million 401(k) participants begin
opening their 401(k) statements.
Reported by Nevin E. Adams
According to upcoming research from the Spectrem Group, the average investment return on 401(k) balances will be a negative 4%. However, due to annual contributions averaging 8%, and company matches there is still a good chance that most participants will see an overall increase in their 2000 account balance.
The Spectrem Group research suggests that a third of 401(k) participants have been in their plans for five years or less, and thus have never had to deal with a down market. In fact, the study suggests that participants may have already begun preparing, backing off from equity investments.
The 2000 study found that participants on average had a 70/30 investment split between stocks and bonds, down from an 80% allocation to stocks in 1998. However, some of that movement may be the result of a downturn in the value of the underlying stock investments.
Participant respondents also noted:
- an average of 9 investment options, though they used only 3.5 of them
- 30% of participants went online to company web sites for plan information and transactions, up from 20% in 1998
- 15% of participants had performed plan transactions on the Internet, up from just 2% just two years ago.