Roth Usage Up Among Younger Employees

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Wells Fargo has released Q1 2013 data that reveals some interesting developments. Compared with the same period in 2012 —

• Roth usage is up slightly, from 8.9% to 10%, but for people in their 30s, 16.9% took advantage, compared with 15.2% a year earlier. Among people in their 60s, only 4% used the Roth option.
• 89% of new hires used managed products, but less than half of their money went into those investments.
• People using HSAs had significantly higher account balances and slightly higher deferral rates.

The data comes from DC plans Wells Fargo manages, and includes more than 2 million eligible employees.

WF pointed to heightened awareness of Roth options as well as concern about increased tax rates for the uptick in Roth usage by younger people. The move toward HSAs and low-cost insurance vs. employer-sponsored health care is akin to the move from DB to DC plans — that is, individuals are taking more responsibility, which may account for the healthier balances.

Wells Fargo also voiced concern about usage of managed products, citing increased exposure to volatility for participants who may view them as just another fund.