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The Efficiency of Sponsor and Participant Portfolio Choices in 401(k) Plans / Ning Tang, Olivia S. Mitchell, Gary R. Mottola, Stephen Utkus.
- Format:
- Book
- Author/Creator:
- Tang, Ning.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w15317.
- NBER working paper series no. w15317
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Efficiency of Sponsor and Participant Portfolio Choices in 401
- The Efficiency of Sponsor and Participant Portfolio Choices in 401
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2009.
- Summary:
- Portfolio performance in 401(k) plans depends on both the investment menu made available by plan sponsors and participants portfolio decisions. We use a unique dataset of nearly 1 million participants in one thousand pension plans to identify key portfolio inefficiencies in 401(k) plans,attributing them either to the sponsor's menu design or to participants' own portfolio choices. We show that most sponsors offer efficient investment menus. However, many participants fail to construct efficient portfolios, leading to retirement wealth that could be one-fifth lower due to poor portfolio decisions. Because participants are the main source of inefficient DC portfolio choices, strategies targeting their portfolio choices, such as improved default investment strategies or advice programs, may help. Also, in sponsors' design of 401(k) menus, the number of options offered is less important than the range of funds provided.
- Notes:
- Print version record
- September 2009.
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