Average 401(k) asset allocation in equities has been the highest since January 2001 at 71.9% this past June, according to data from Alight.
Alight Vice President of Data & Analytics Rob Austin joins Wealth! to give insight into how Americans can maximize their 401(k) contributions. A new trend has seen a surge in “Super Saver” activity, or workers who contribute well over the suggested 10% of their salary toward their retirement savings.
Austin starts by outlining that workers need to make the most of their employer contributions and company matches for their 401(k) accounts:
“You want to invest it. That’s the whole reason that you’re putting money in for retirement is to see that money grow, but over time, we see very, very few people will actually look and make sure that they’re rebalancing that portfolio. In fact, last year we only saw about 20% of people make any sort of trade at all in their 401(k). And when you think about what happened in 2023, when, say, equities were earning 15, 20, 25% and bonds were only like at 5 or 10%. The portfolio you had at the beginning of the year is certainly not going to match the portfolio that you had at the end of the year.”
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This post was written by Nicholas Jacobino
Video transcript
Switching gears from money, you are giving away to money.
You should be saving this past month average asset allocation for 401k s increased to 71.9%.
It’s the highest level since January of 2001.
Where were you win for?
More on this trend as well as some tips to help, make sure you’re setting yourself up best for retirement.
We welcome in Rob Austin, who is the Light solutions head of research?
Great to have you here, Rob and let’s dive right into this here as people are trying to figure out the best solutions to tap into their 401 401k or beef it up.
What is the first step that many people might be missing here?
Yeah, I think the first thing you want to do is make sure you’re saving enough to get that full company match.
Uh company match will change based off of where you’re employed.
But what we show is the most common match is a dollar for dollar match on 6%.
So if you are not saving at least 6% you’re leaving money on the table and it’s really, really hard to kind of find that 100% guaranteed immediate return anywhere else that you’re investing.
Uh, our research shows that it’s about 20% of people are not saving enough to get that full company match.
Certainly.
And so after you’ve gotten that company match, where else can you start to add on to your savings?
Yeah.
So I think the other part is, let’s make sure that that money is working for you.
Uh, you want to invest it.
That’s the whole reason that you’re putting money in for retirement is to see that money grow.
Um But over time, we see very, very few people will actually look and and make sure that rebalancing that portfolio.
In fact, last year, we only saw about 20% of people make any sort of trade at all in their 401k.
And when you think about what happened in 2023 when say equities were earning 1520 25 percent and bonds were only like at five or 10%.
The portfolio you had at the beginning of the year is certainly not going to match the portfolio that you had at the end of the year.
So do a retirement checkup.
And, and if you can’t find the time for that or maybe it’s not something that, that, that you, that you want to do.
There are certainly options, things like automatic rebalancing where you can kind of click a button to say, put me back into a 6040 split or, or use something like a managed account which actually has a professional, do the investing for you.
Why have so few people or relatively few people, I guess here traded or rebalance their accounts at this juncture.
Yeah.
So I think it’s a number of different factors.
Brad, I mean, I think one factor is some people are just not professionals.
This, this might be the only exposure they have to the stock market.
And so don’t really understand things like profit taking mode or, or even the whole concept of rebalancing.
And so as the the market keeps going up and up and up, people are very content just to watch that account grow.
What we know from more than 25 years of tracking this, this information for people is people are much more likely to take an action and make a trade when the market goes down.
And unfortunately, that’s really bad market timing because people end up locking in losses as opposed to taking it when it’s when it’s higher.
So I think some of it’s just human nature and I think some of it is just some inexperience that people have.
Is there one retirement strategy that people can put into action perhaps before the fed cuts interest rates?
Hm.
Yeah, I mean, I would say do a quick check up and say what is exactly the right investment portfolio for you?
And if you don’t feel comfortable enough doing that, look for other options that are in your 401k, something like what’s called a target Day fund, which is designed to be an all investment.
Look for maybe like some online advice or online guidance or, or a man account something where you can get a professional to ask you the questions.
What’s your risk tolerance?
What else do you have?
How much are you, do you have saved maybe outside the plan and be able to look at ways to really construct a very holistic portfolio for you, Rob Austin.
Great, speaking with you and thanks so much for the insights here.
A Light Solutions head of research, Rob Austin.
Appreciate it.