Fidelity Investments issues retirement report card on 15th year anniversary of 401K.

BOSTON--(BUSINESS WIRE)--June 19, 1997--

-- More than half grade their retirement saving effort "B" or better -- Majority use long-term, rather than market-timed, strategies -- Half have saved more than $50,000 through their 401(k)

Marking the 15th anniversary of the 401(k), Fidelity Investments, the nation's leading provider of defined contribution plan services, today issued a report card on the attitudes and behaviors of long-term 401(k) owners.

Based on a study of Americans who've owned 401(k)s for more than 5 years, the majority (54 percent) of respondents graded themselves a "B" or better in terms of how they have saved for retirement. Of those, 16 percent of the respondents rated themselves "A" for excellent, and 38 percent gave themselves a "B." Thirty-six percent of the respondents gave themselves a "C."

The report card - "Americans and Their 401(k)s" - is the first public study of long-term 401(k) owners in the industry. Its release follows a nationwide telephone study, conducted by Richard Day Research in May, of 504 individuals who have saved, for an average of 9.3 years, through a company-sponsored 401(k) administered by Fidelity. The study benchmarks 1997 as the 15th year following the Internal Revenue Service's confirmation that companies could design 401(k)s. Today, it's estimated that more than 22 million Americans already are using 401(k)s to save for retirement.

401(k) Owners Accomplishments Versus General Public

One of the most significant revelations of this study is the accumulation of retirement savings assets by long-term 401(k) owners, and how that differs from the general population. Half (51 percent) of the study respondents, who on average were 45 years old, reported having saved more than $50,000 through their 401(k); and, 29 percent reported having saved more than $100,000 through their 401(k).

"Clearly, 401(k)s have made a significant difference in enabling people to save," said Peter J. Smail, president, Fidelity Institutional Retirement Services Company. "They're a critical route to accumulating assets for a comfortable life after retirement."

In fact, the total amount saved for retirement, through 401(k)s and other retirement accounts, by study participants significantly exceeds the amount saved by Americans in general. Half (48 percent) of the respondents had saved more than $50,000, with 31 percent exceeding $100,000. Only 21 percent of 401(k) owners surveyed had saved less than $10,000 total for retirement.

In contrast, the recent Public Agenda study found that nearly half of 1200 Americans (46 percent) had saved less than $10,000 for retirement and 401 (k) owners were likely to have more retirement savings assets than those who did not own 401(k)s.

"After a 15-year explosion in 401(k) availability, its unfortunate that more Americans haven't taken advantage of these programs," Smail said. "The convenience of workplace savings programs should be driving more Americans to save for retirement, and today more than 80 percent of Americans who have the option to participate in a company 401(k) do so."

The report card also found that workplace-program investors cited the ease of saving through automatic deductions as one of the most valuable benefits of their 401(k) plan. That finding supports the Public Agenda study revelation that Americans overwhelmingly (77 percent) prefer to save for retirement through automatic deductions.

How Much to Save?

A majority of the study's long-term 401(k) owners (59 percent) said they expect to need up to $500,000 in total retirement savings. Specifically, 24 percent expect to need to save between $100,000 to $250,000; and, 27 percent expect to need to save between $250,000 and $500,000. Meanwhile, 21 percent expect to need to save between $500,000 and $1 million, while 11 percent expect to need to save $1.5 million or more for retirement.

"The automatic, tax-deferred savings offered by 401(k)s can accelerate Americans progress toward those goals," said Smail.

Smail noted that with $50,000 presently saved, a 45-year old can expect that investment to have grow to $233,048 over the next 20 years, assuming a constant annual growth rate of 8 percent, not withstanding additional future contributions. Same assumptions considered, that amount increases to $423,046 if an individual contributes $75 per week ($300 per month) over the next 20 years.-(a)

"We need to continually provide 401(k) owners with the information they need to help reach these goals," Smail said. "With company education programs, we'll see more 401(k) savers maximizing their dollar contributions and using after-tax investments to better save for retirement."

General Attitudes and Confidence

All respondents, 100 percent, said that saving enough for retirement is one among their three most important financial goals, in addition to paying for college and covering health care costs. All told, 86 percent of the respondents cited saving enough for retirement as their single greatest financial goal.

Finally, an overwhelming 85 percent of the long-term 401(k) participants said they were somewhat or very confident that they will have enough money saved to provide the kind of lifestyle desired in retirement.

Fidelity Investments is the nation's largest mutual fund company and one of the leading providers 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 April 30, 1997, Fidelity had total managed assets of $511.4 billion.

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Editors'/Reporters' Note: Infographics are available to illustrate highlights of "Americans and Their 401(k)s." Two samples are attached to fax versions of this news release. Infographics will be made available upon request to Corporate Communications, [phone].

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.

-(a) Neither assumption takes inflation or taxes into consideration. Tax-deferred earnings and taxable contributions will be taxed at the time of withdrawal at the federal income tax rate in effect at that time. Past performance is no guarantee of future results and your own account may earn more or less than this example.

CONTACT: Fidelity Investments

John Stevens, [phone]