While 401(k) plan balances and participation are at record-highs, a new survey from Aon Hewitt, the global talent, retirement and health solutions business of Aon plc, reveals that few U.S. workers are actively managing their 401(k) portfolios, leaving opportunity for workers to be more proactively involved in their accounts and improve long-term savings.
According to Aon Hewitt’s analysis of 138 defined contribution (DC) plans, representing 3.5 million eligible workers, participation in 401(k) plans reached 79 percent at the end of 2014, the highest level since Aon Hewitt began tracking this data in 2002. The average plan balance also hit an all-time high of $100,320, up notably from $91,060 at the end of 2013.
Additionally, Aon Hewitt found that nearly one quarter of workers (24 percent) increased their contribution rate in 2014. However, few workers are proactive when it comes to managing their accounts. Only 15 percent of workers rebalanced their portfolio in 2014—making it one of the lowest trading years on record. Even when eliminating the participants who are fully invested in target-date funds or other premixed portfolio options—which do not require rebalancing—only 19 percent of workers rebalanced their portfolio.
Aon Hewitt also found that on average, workers were invested in just 3.6 different funds, down from 3.7 in 2013 and 3.9 funds in 2012.
“In the last decade, employers have made strides in helping workers prepare for retirement by adding plan features that make saving and investing easier,” explained Rob Austin, director of Retirement Research at Aon Hewitt. “At the same time, employees continue to take a passive role in managing their 401(k) plans. Employers can nudge workers in the right direction by providing more robust products, tools and resources.”