Baby Boomers' 401(k) Accounts Too Heavily Into Stocks to Withstand a Downturn

It’s no wonder 401(k) retirement account holders love stocks. With the long-running bull market in fairly solid footing, 401(k)s are up 50 percent in the last five years.
And this has resulted in an increased percentage of equities within many 401(k) accounts, which can add increased exposure to the negative impact of a market downturn, according to a review by Fidelity Investments.

Many older 401(k) account holders, including Baby Boomers close to retirement age, had stock allocations higher than those recommended for their age group, Fidelity found. Average asset allocations to an age-based target date fund were reviewed and Fidelity found 18 percent of people ages 50-54 had a stock allocation at least 10 percentage points or higher than recommended. And for people ages 55-59, that figure increased to 27 percent.
An additional 11 percent of people ages 50-54 had 100 percent of their 401(k) assets in stocks, while 10 percent of people ages 55-59 had all of their 401(k) assets in stocks.
“One thing we learned from the last recession is that having too much stock, based on your target retirement age, in your retirement account can expose your savings to unnecessary risk – it’s the hidden danger that many workers are unaware of,” said Jim MacDonald, president, Workplace Investing, Fidelity Investments.
This is especially true among workers nearing retirement, who should be taking steps to protect their 4019(k)s, he added.
Overall, the average 401(k) balance dipped slightly at the end of Q2 to $91,100 from $91,800 at the end of Q1, Fidelity says. And that’s nearly flat from the end of Q2 2014 average of $91,000. However, IRA balances increased to $96,300 at the end of Q2, up from $94,000 at the end of Q1 and $92,500 one year ago.
Fidelity is teaming with thousands of employers across the country on a campaign that targets 401(k) account holders who may want to rebalance their asset allocation to help them weather the next market downturn.

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