Stable Value Remains Core Asset Class, New York Life Retirement Plan Services Analysis Shows

WESTWOOD, Mass., April 11, 2012 /PRNewswire/ -- In a recent analysis of its client base, New York Life Retirement Plan Services, a leading provider of retirement solutions to U.S. corporations and unions, found that despite a low interest rate environment, principal preservation investment solutions remain a heavily utilized retirement plan investment option with 50% participant utilization. 

Since the financial crisis of 2008, on average, more than 20% of retirement assets have been invested in stable value investments and half of all participants across New York Life's retirement platform have some 401(k) savings within a stable value investment today. With the exclusion of stable value investments as a qualified default investment in the Pension Protection Act of 2006, the viability of stable value investments as a mainstream retirement asset class was considered to be in doubt. Yet time, and a turbulent economic environment, has proven otherwise. 

"Gen Y has not experienced a positive market cycle during their professional careers, and Baby Boomers just watched a good portion of their retirement erode in rough market conditions," said Steven Dorval, managing director of retirement and investment strategy at New York Life Retirement Plan Services. "All participants require an investment option that will preserve principal, and at a minimum keep up with inflation. These are among the reasons stable value continues to be a core savings option."

The reliance on stable value is not attributed solely to an aging population that wants to shelter their retirement savings from the marketplace. Instead, significant stable value usage spans all age ranges. On average, Baby Boomers – participants between 49 and 66 years of age – allocate 22% of their assets in stable value, compared with 12% for Gen X participants – those between 33 and 48 years – and 10% for Gen Y – those between 23 and 32 years.

Moreover, half of all participants invested at least a portion of their defined contribution balances to stable value in 2011, according to the analysis. Baby boomers logically had the highest rates of stable value use, at 58%, followed by Gen X at 46% and Gen Y at 32%. The data is significant, given that participants are not automatically defaulted into a stable value investment, but must proactively place assets there.

Plan sponsors and advisors have noted this trend as well and many are scrutinizing their current stable value investment choice.

"A principal preservation asset class was once an afterthought for most sponsors and advisors, with a recordkeeper's proprietary solution being an easy choice," said Patrick Murphy, managing director of sales for New York Life Retirement Plan Services. "No longer. Our advisors know this core asset class demands the same level of scrutiny as any other investment option.  With interest rates expected to be negligible for the foreseeable future, money markets are not a palatable option for most sponsors – and stable value investments need to deliver a competitive rate of return with a credible guarantee." 

About New York Life Retirement Plan Services

New York Life Retirement Plan Services offers bundled retirement plan solutions and defined contribution investment only products throughout the United States. New York Life Retirement Plan Services, a division of New York Life Investments, administers $37.2 billion in bundled retirement plans as of December 31, 2011. With offices in Westwood, Massachusetts, Parsippany, New Jersey, and San Francisco, New York Life Retirement Plan Services is widely recognized for its leadership within the retirement plan industry.

About New York Life Investments

New York Life Investments ranks among the largest asset management firms in the United States[1]. Through its multiple boutique management structure, New York Life Investments offers access to leading institutional managers that drive performance. Through MainStay Investments and NYLIFE Distributors LLC, New York Life Investments provides access to some of the most highly regarded mutual funds and wrap accounts in the industry. Together with its affiliates and over 1,400 employees, New York Life Investments manages over $313 billion in assets as of December 31, 2011. New York Life Investments is a leading provider of retirement plans for corporations, multi-employer trusts, and individuals.

"New York Life Investments" is a service mark used by New York Life Investment Management Holdings LLC and its subsidiary, New York Life Investment Management LLC.

New York Life Insurance Company, New York, New York

[1] Source: Pensions & Investments, May 31, 2011

SOURCE New York Life Retirement Plan Services