As 2012 moves into its third quarter, Fidelity Investments has announced that 401(k) contributions by both employers and employees continued to rise throughout Q2, over the year. Stronger adoption of Roth plans and target date funds were measured by Generation Y participants when compared to other age groups. Since 2009, Fidelity’s in-house analysis of its accounts has shown that contribution have been continuously increasing and the average contribution during Q2 2012 rose to $1,660, up $30 from the same period in 2011 and $150 from 2009. Average employer contributions also rose $30 over 2011 to $950. While contribution rates increase, the average 401(k) balance edged downwards to $72,800, down 2.5 percent from Q1.
“Rising contribution levels from both employees and employers show a strong commitment that both have to workplace savings plans,” said James M. MacDonald, president, Workplace Investing, Fidelity Investments. “Trends we are seeing among our more than two million Gen Y participants are particularly exciting. They are starting off with better diversified portfolios than previous generations which can have a positive impact over the long term.”
Among Gen Y participants, Fidelity found that younger investors have seized on age-based asset allocation and have diversified through the adoption of target-date funds. Analysis also found that Roth 401(k) adoption rose in Q2, especially among Gen Y participants. The Roth 401(k) savings option was offered by 35 percent of employers, a number 25 percent higher than five years ago. In non-Roth savings plans, Gen Y participants represent the group most likely to use the savings option and have a participation rate of 8.8 percent compared to a 5.8 percent adoption rate by all other age groups.