At Turn of Century, 401k Investors are Aggressive, Diversified.

Business Editors

MARLBOROUGH, Mass.--(BUSINESS WIRE)--Jan. 27, 2000

Since the early 1980s, when the defined contribution plan began its revolution of retirement savings, the 401(k) plan has become wildly popular among working Americans. But are 401(k) investors allocating their portfolios wisely to maximize earnings growth?

According to a major report on corporate defined contribution plans serviced by Fidelity Investments(R) , today's 401(k) participants are savvy investors with diversified portfolios that include significant exposure to equities. This investment pattern holds across various age categories and account balances, thanks largely to education efforts by their employers.

The Fidelity report, &uot;Building Futures: How American Companies Are Helping Their Employees Retire,&uot; found that plan participants are using investment options to diversify assets within their portfolios and pursue a growth strategy consistent with their age and investment time horizon.

Participants with more time before retirement age invest with more risk. &uot;Generation X and Y&uot; (people in their twenties) put an average of 79 percent of assets in equity funds, compared to minimal investments in blended funds (9 percent), stable value (5 percent), short-term (4 percent) and fixed-income (2 percent) options. Holdings in these less volatile vehicles increase with age.

For example, participants in their fifties focus more than two-thirds (68 percent) of assets in growth-oriented vehicles, which include company stock, and domestic and international equity funds. Meanwhile, this age group spreads the rest (32 percent) among less volatile capital preservation options, such as blended funds, short-term, stable value and fixed-income vehicles.

The eldest bracket of plan participants - people in their sixties - are even more conservative, but still allow for growth potential by maintaining about half of their portfolios in equities.

&uot;The typical investment pattern in a 401(k) is to begin aggressively when time is on your side, and gradually decrease exposure to risk as you near retirement age,&uot; said Kathryn Hopkins, executive vice president, Fidelity Institutional Retirement Services Company, the nation's largest provider of 401(k) plans. &uot;The fact that participants in their sixties continue to put about half or more of their retirement savings in stocks may signal that they recognize the value of maintaining a diversified portfolio to guard against inflation.

&uot;It may also indicate an awareness among workers approaching retirement that people are living longer and the time spent in retirement can be almost as long as the time spent working,&uot; Hopkins said.

However, the Fidelity report shows that variances in asset mix do not appear to correlate with account balances. Among 401(k) investors with account balances ranging from $5,000 to $20,000, who might be considered relatively newcomers to investing, have more than 66 percent of their portfolios invested in domestic and international equity funds, and company stock.

That is only slightly less than allocations held by high balance investors, ones with more than $150,000 in their 401(k)s. Among this group, 69 percent of their portfolios are allocated to equity funds.

&uot;In terms of 401(k) investing, we are now in the `Century of Choices,' with employer plans offering more investing options than ever,&uot; said Hopkins. &uot;With increased attention on education and more access to information about investments, today's plan participants are more confident about taking control of their retirement savings goals and making the choices most appropriate to their retirement needs.&uot;

&uot;Building Futures,&uot; is an inaugural report on corporate defined contribution plans, based on data gleaned from Fidelity Institutional Retirement Service Company's recordkeeping systems at the end of 1998. At that time, Fidelity served more than 5,400 plans and more than 5 million participants.

Fidelity Investments is the nation's largest mutual fund company and a leading provider of financial services. Fidelity offers investment management, retirement, brokerage and shareholder services directly to individuals and

institutions, and through financial intermediaries. The firm also is the No. 1 provider of 401(k) retirement savings plans, the second largest discount brokerage firm and the third largest provider of 403(b) retirement plans for not-for-profit institutions in the United States. At December 31, 1999, Fidelity had total managed assets of $955.1 billion.

Foreign investments involve greater risks and may offer greater potential returns than U.S. investments. For more complete information about Fidelity mutual funds, including fees and expenses, call or write Fidelity for free prospectuses. Read them carefully before you make your investment choices.

Fidelity Institutional Retirement Services Company is a division of Fidelity Investments Institutional Services Company, Inc., 82 Devonshire Street, Boston, MA 02109.

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