More Choices in 401(k)s: Companies are adding investment options to their
401(k) plans, but participants seem to be sticking to their guns, according to a
recent survey by the Vanguard Group, a Malvern, Pennsylvania-base mutual fund
company.
The average Vanguard 401(k) plan offered 20 investment options in 2006, up
from 13 options in 2000. The average plan participant, however, used only four
options in 2006, up from three options in 2000. While 57 percent of plans
offered between 11 and 20 options in 2006, more than half of 401(k) participants
invested in three or fewer options, according to the study.
The study also found that 40 percent of large plans, or those with 5,000 or
more participants, offer company stock.
Not surprisingly, in 2006, 37 percent of 401(k) participants in Vanguard
plans who were offered company stock declined to invest in the option. However,
nearly four in 10 participants in plans offering company stock had more than 20
percent of their account balance invested in company stock—a disturbing finding
given the fallout after Enron, where many employees lost all of their retirement
savings because their money was invested in company stock. Nine percent of
participants had more than 80 percent of their account balance in company
stock.
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