For participants in plans managed by Vanguard, the news was very good at the end of 2012. Account balances grew by 10%, with the median growing 67% since 2007, the worst investment period in recent history. A fifth of the 3.4 million Vanguard participants contributed 10% or more, with 11% contributing the max. More participants are using a professionally managed investment option (a TDF, balanced fund or managed account) — 36% in 2012, up from just 17% in 2007. It’s estimated that the PMI option will grow to 55% in 2017. When investment advice is offered, 14% of participants used it.
Overall, when combining the match and average contribution (which are artificially muted due to the 32% of plans accounting for 50% of participants using auto-enrollment — which tends to have a lower deferral rate to start), the average savings rate was 10.5%. Combined with Social Security, that’s not as bad as many experts would have us believe. In fact, the average Vanguard participant — 46 years old and making $72,000, with a 10% deferral rate and facing another 20 years of employment — is on track to replace 75%-80% of income when Social Security benefits are taken into account.
Other interesting data points:
• 51% of participants with TDFs used just one.
• 97% of QDIAs were in a balanced investment strategy, with 90% in a TDF.
• Roth 401(k)s were available in 49% of Vanguard’s 2,000 plans, with 11% of participants taking advantage.
• Only 12% of participants traded, accounting for just 1.7% of assets.
• Of those who left the company, 82% left their money in the plan.
The full white paper and video are here.
