SSRN Home Search and Download Papers Browse Abstract and Paper Submission Subscribe to Networks View Briefcase Top Papers Top Authors Top Institutions

 

Abstract

 
 

References (21)

Beta

 
 

Citations (18)

Beta

 


 



The Adequacy of Investment Choices Offered By 401K Plans

Edwin J. Elton
New York University - Department of Finance

Martin J. Gruber
New York University - Department of Finance

Christopher R. Blake
Fordham University - Graduate School of Business Administration


March 15, 2004

EFA 2004 Maastricht Meetings Paper No. 1176

Abstract:     
Defined-contribution plans represent a major organizational form for investors' retirement savings. Today more than one third of all workers are enrolled in 401K plans. In a 401K plan, participants select assets from a set of choices designated by an employer. For over half of 401K-plan participants, retirement savings represent their sole financial asset. Yet to date there has been no study of the adequacy of the choices offered by 401K plans. This paper analyzes the adequacy and characteristics of the choices offered to 401K-plan participants for over 400 plans. We find that, for 62% of the plans, the types of choices offered are inadequate, and that over a 20-year period this makes a difference in terminal wealth of over 300%. We find that funds included in the plans are riskier than the general population of funds in the same categories. We study the characteristics of plans that are associated with adequate investment choices, including an analysis of the use of company stock, plan size, and the use of outside consultants. When we examine one category of investment choices, S&P 500 index funds, we find that the index funds chosen by 401K-plan administrators are on average inferior to the S&P 500 index funds selected by the aggregate of all investors.

Working Paper Series

Date posted: August 03, 2004 ; Last revised: April 28, 2008

Suggested Citation

Elton, Edwin J., Gruber, Martin J. and Blake, Christopher R., The Adequacy of Investment Choices Offered By 401K Plans (March 15, 2004). EFA 2004 Maastricht Meetings Paper No. 1176. Available at SSRN: http://ssrn.com/abstract=567122 or doi:10.2139/ssrn.567122


Export to: Export Citation What's this?

Contact Information

Martin J. Gruber (Contact Author)
New York University - Department of Finance ( email )
44 West 4th Street
Ste 9-190
New York, NY 10012-1126
United States
212-998-0333 (Phone)
212-995-4233 (Fax)
Christopher R. Blake
Fordham University - Graduate School of Business Administration ( email )
113 West 60th Street
Lowenstein Building
New York, NY 10023
United States
212-636-6750 (Phone)
Edwin J. Elton
New York University - Department of Finance ( email )
44 West 4th Street
Ste 9-190
New York, NY 10012-1126
United States
212-998-0361 (Phone)
212-995-4233 (Fax)
Feedback to SSRN (Beta)


Paper statistics
Abstract Views: 4,155
Downloads: 654
Download Rank: 10,235
References: 21
Citations: 18

© 2010 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright
This page was served by apollo1 in 0.140 seconds.