Young Investors Benefit from Auto Enrollment 401(k) Options

October 4th, 2010 Brock Hailes Leave a comment Go to comments

The 401(k) option of automatic enrollment offered by U.S. employers is helping young workers save enough for retirement, says Financial Engines, Inc. According to the California-based company, younger employees have better options available to help them save more responsibly and effectively for retirement.

Younger Workers Have Better Risk and Diversification Options

According to a study conducted by the firm, about 52 percent of workers under the age of 30 who are eligible to automatically enroll in an employer investment option have good risk and diversification options for their age. These options put them on a better track for retirement than the 12 percent of employees in the same age group who don’t have access to that 401(k) feature.

The decision to automatically enroll workers into company plans came after the Department of Labor encouraged employers to do so with the passing of the Pension Protection Act in 2006.

Some of the most popular investments workers are automatically enrolled in include target-date fund, which takes money from stocks and moves them to more conservative options like bonds when the worker gets closer to retirement.

Adjusting Risk Levels for Retirement

While the study found that many younger investors are in good hands with automatic enrollment, investors of all ages could do a better job of manually adjusting their risk levels to best reach their retirement goals. The study also found that with the recession hurting savings rates, about 39 percent of workers were no longer contributing enough to their accounts to receive their full employer match.

As a younger or more mature investor, it’s important to review your 401(k) portfolio to ensure that you’re getting the most bang for your buck when it comes to diversification and employer matches. During the open enrollment period, take time to look over your options to make sure they’re right for you.

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