Alight: 401(k) Trading Slows in Q3

Trading activity decreased modestly in the third quarter of 2026 despite mixed market results, according to Alight Solutions’ Third Quarter 2026 update to its 401(k) index.

All four benchmarks Alight tracks—the Bloomberg U.S. Aggregate Bond Index, the S&P 500 Index, the Russell 2000 Index and the MSCI All-Country World ex-U.S. Index—declined in September, and the Bloomberg and Russell were down for Q3 overall.

September had only one trading day with above-normal volume, and Q3 only had four in total—compared with 10 days during Q2. Some 0.18% of assets were transferred during Q3, compared with 0.88% for 2026 to date. In September, trading in 401(k) accounts accelerated but remained relatively slow, with only 0.06% of assets transferred, coming off a month of record low trading in August.

“The results line up with a long-term shift in plan design: Automatic enrollment brings more workers into the plan and puts them in the default investment; target-date and other managed options handle asset allocation and rebalancing inside the fund, so participants have fewer decisions to make themselves; [and] target-date and premixed funds have grown,” wrote Adam Vredeveld, an Alight senior client manager for defined contribution, in an email to PLANSPONSOR. “Low trading could reflect discipline, disengagement or simply the effect of good defaults.”

Vredeveld noted that the Federal Reserve’s September 16 decision to raise its benchmark interest rate by 25 basis points did not spur more trading in September. September 15, the day before the Fed’s decision, was the month’s only high-activity day, at 2.33 times the trailing 12-month average. Over the 10 trading days after the announcement, trading activity averaged 0.59 times the trailing average and never reached an above-normal level.

In September and Q3, investors generally favored fixed-income assets, according to Alight’s index updates. Most trading days—17 of 21 in September and 42 of 64 in Q3— recorded net inflows to fixed-income funds.

Net inflows for the third quarter were allocated primarily to bond funds, at 47%, with 20% of distributions going to each of stable value and money markets. Nearly half—46%—of outflows came from large-cap U.S. equity funds, while 24% came from target-date funds.

For September, 48% of inflows were to stable value, 39% to money market funds and 4% to premixed funds. Outflows were concentrated in large-cap U.S. equity funds, at 43%, mid-cap U.S. equity at 23% and international equity funds at 18%.

“The tilt toward fixed income grew each month,” Vredeveld wrote. “Fixed income was favored on 50% of trading days in July, 67% in August and 81% in September. Overall volume stayed low, so this points to modest rebalancing rather than a broad move out of equities.”

Alight reported that a “normal” level of relative transfer activity is when the net daily movement of participants’ balances, as a percent of total 401(k) balances within the company’s index, equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months. A “moderate” relative transfer activity day is when the net daily movement is between 1.5 and 2 times the average daily net activity of the preceding 12 months. An “above normal” day of relative transfer activity is when the net daily movement exceeds twice the average daily net activity.