The Markets February 27, 2009

Retirement a Top Priority for Investors

Almost three-fourths of mutual fund investors hold funds outside of an employer-sponsored plan, and most of those mutual funds were purchased through an adviser.
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A report from the Investment Company Institute (ICI) found that in 2008, 68% of mutual fund-owning households owned funds through employer-sponsored retirement plans, and 73% owned funds outside of such plans. Forty-one percent of fund-owning households held funds both inside and outside of employer-sponsored retirement plans.

Among households owning mutual funds outside of employer-sponsored retirement plans, 77% owned funds purchased from a professional financial adviser, according to a release from ICI.

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Employer-sponsored retirement seem to be the avenue for starting to invest in mutual funds, as ICI found 68% of households who purchased their first fund in 2000 or later purchased that fund through such a plan, and 53% of households that made their first purchase before 1990 did so through an employer-sponsored plan.

Equity funds were the most commonly owned type of mutual fund, held by 80% of mutual fund-owning households. Thirty-eight percent owned hybrid funds, 48% owned bond funds, and 66% owned money market funds.

Characteristics of Investors

Saving for retirement is a financial goal in 95% of households that own mutual funds, and the number one goal for 76% of fund-owning households, according to ICI’s data.

Most households owning mutual funds were headed by individuals in their peak earning and saving years. About two-thirds of such households were headed by persons between the ages of 35 and 64. In addition, ICI said, most fund owners were employed and had moderate household incomes.

Analysis of fund ownership by generation shows that 46% of households owning mutual funds were headed by members of the Baby Boomer generation (born between 1946 and 1964). In addition to being the largest shareholder group, Baby-Boomer households owned the largest share of households’ total mutual fund assets (56%). Thirty-six percent of households owning mutual funds were headed by members of Generation X and Generation Y (born in 1965 or later), and 18% were headed by members of the Silent and GI Generations (born in 1945 or earlier).

Profile of Mutual Fund Shareholders, 2008, is available here.

The Markets February 27, 2009

U.S. Steel Announces Match Suspension

U.S. Steel Corp. announced it has suspended company match contributions for its two New York-based 401(k) plans effective January 1.
Reported by

Workforce Management reported that company spokesman John Armstrong said the company was matching 100% of employees’ contributions up to 5% of pay.

The news report said U.S. Steel’s board of directors has, however, authorized additional, voluntary contributions of up to $300 million to its pension and health care trusts by 2010.

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Other Match Suspensions

The firm is the latest of several to suspend their 2009 matching contributions, including Coca-Cola Bottling Co. Consolidated (see “Coca-Cola Bottling Caps Match“), Sears (see “Sears Suspends 401(k) Match, Drops 1,100 Jobs’), TheDenver Post (see “Denver Post Latest to Suspend 401(k) Match’), Unisys (see “Unisys Cuts 401(k) Match’), Starbucks (see “Starbucks 401(k) Match Goes Discretionary’), Motorola (see “Motorola Freezes Pension, Suspends 401(k) Match’), Eddie Bauer (see “Eddie Bauer Suspends Match’), 7-Eleven (see “7-Eleven Latest to Suspend 401(k) Match’), and FedEx (see “FedEx Suspends Match, Cuts Pay’).

However most plan sponsors responding to a recent PLANSPONSOR survey said they had no plans to change their 401(k) match program (see “SURVEY SAYS: What Are Your Plans for Your Match?’)—a sentiment echoed in a recent employer survey by Mercer (see “Most Employers Don’t Plan to Reduce Contributions’). And Dollar Thrifty Automotive Group, Inc., recently reinstated its match after a suspension (see “Dollar Says Reinstating Match “Right Thing to Do’’), as did Louisville, Kentucky-based Republic Bank (see “Louisville Bank Ups 401(k) Match“).

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