One third of Vanguard 401(k) plan participants invested their entire account balance in a professionally managed asset-allocation investment option last year, a dramatic increase from the 9% who did so in 2005.

Trends in 401(k) participants' investing habits were detailed in Vanguard's How America Saves 2012 survey. The survey gives an indication of where retirement planning is going, says Vanguard.

In 2011, 33% of Vanguard 401(k) participants were invested in a professionally managed allocation program with 24% in a single target-date mutual fund, 6% in a single traditional balanced fund and 3% in a managed account advisory program.

Having plans professionally managed improves the portfolio diversification for many participants, helping to reduce the risks associated with either having too much in equities or too little. Last year, 18% of participants held either all equities or no equities, compared to 34% who held those positions in 2005, the study says.

"Some question the benefits of 401(k) plans because they transfer investment decision-making to generally inexperienced participants," says Jean Young, chief author of the report. "Now, however, an increasing number of participants can leave their asset allocation, investment selection and ongoing management responsibilities of their account to the professionally managed allocation options available in their DC plans."

Much of the growth of the managed programs is attributed to the adoption of target-date funds, says Vanguard. Eighty-two percent of plan sponsors offered target-date funds in 2011 compared to 28% in 2005. Target-date funds are the investment default in automatic enrollment plans, but many participants also are choosing them voluntarily, Vanguard says.

"We anticipate 55% of all participants and 80% of new plan entrants will be entirely invested in a professionally managed allocation by 2016," Young says.

Employees in plans with an automatic enrollment feature had a participation rate of 80% at the end of last year, compared with a participation rate of 60% for employees in voluntary enrollment plans. Seventy percent of automatic enrollment plans have implemented automatic annual deferral rate increases, an increase from 30% in 2005.

The survey showed the average savings rate, counting employee and employer contributions, was 10.4% of salary. Vanguard recommends investors save 12% to 15% of their salary.

The survey showed the median participant account balance was $25,550 and the average was $78,296.

"It is important to keep in mind that typical participants are in their mid-40s with 20 to 25 more years to grow their accounts," says Steve Utkus, head of Vanguard's Center for Retirement Research and co-author of the report.

-Karen DeMasters