|
Stocks lure 401K money
|
 |
December 11, 1996: 2:41 p.m. ET
Workers favor stocks over fixed-income investments for retirement
From Correspondent Carmine Gallo
|
NEW YORK(CNNfn) - For years employees put more money into conservative fixed-income investments than into stocks when it came to funding their retirement funds.
But thanks to the roaring bull market of 1996, this was the first year that American workers put more of their 401K money into stocks than into fixed-income investments known as guaranteed investment contracts, according to a recent survey.
High returns are the primary reason for the influx of retirement cash into stock funds, which offered a rate of return of 40 percent, versus the 33 percent on GICs.
The movement to stock funds has been going on for about five years, as fixed-income investments have made up a smaller and smaller percentage of 401K money.
In 1992, for instance, stock funds accounted for just one-quarter of all 401K money. Today those funds have grabbed 40 percent of retirement money and may forge ahead to fully half of all 401K funds if Americans continue putting their retirement funds in stocks at such a furious pace.
Aside from the higher returns, another reason people are choosing stocks is because their employers are offering more stock funds to choose from.
Last year companies offered an average of six funds to their workers. This year it's up to seven.
Companies are also doing a better job at educating those workers about their choices, says Brian Ternoey, investment advisor at Foster Higgins.
"The average employee is not an MBA and does not work on Wall Street," he said. "So, a lot of education comes from the plan's sponsor. We've seen that blossom."
But more opportunities to invest in stocks bring more risks. Even if workers are not investment professionals, said Margaret-Ann Cole, an employee benefits consultant at Kwasha Lipton, they need to educate themselves before they plunge their retirement savings into the market. (156K WAV) or (156K AIF)
But one thing has not changed in 1996. And that is the number of employees who take advantage of their company 401K plans. It has stayed constant at 76 percent. 
|
|
|
|
|
 |
|
