SURVEY SAYS: Participant Reaction to Market Volatility
Data from the Alight Solutions 401(k) Index shows retirement plan participants reacted poorly to the latest round of stock market volatility, with trading activity described by researchers as “exceptionally high” over the days following the stock market plunge.
Last week, I asked NewsDash readers, “Did your retirement plan participants make transfers related to the recent market plunge, and did you?”
More than six in ten (63.2%) work in a plan sponsor role, 18.4% are advisers/consultants, 15.8% are TPAs/recordkeepers/investment managers and 2.6% are CPAs.
The majority of responding readers (55.3%) reported they do not know if their retirement plan participants made transfers related to the recent market plunge, while 31.6% said their participants did not. “Yes, some moved out of equity” and “Yes, some moved into equity to take advantage of low purchase prices” each were selected by 7.9% of respondents.
Asked if they themselves made a transfer in their retirement accounts related to the recent market plunge, 94.7% said no, but 2.6% each reported they moved out of equity and they moved into equity to take advantage of low purchase prices.
Among readers who chose to leave comments, many reported that participants were calmed by good advisers and providers, but one reader noted, “Despite all our communications efforts, participants still take a short-term approach to investing. If I had any hair left I would be pulling it out!” Others shared advice to stay the course during such corrections. Editor’s Choice goes to the reader who said: “I got lucky in that my ROTH IRA contribution hit my account at the low point! I bought it on sale! :)”
A big thank you to everyone who participated in the survey.
Verbatim
7.5% of our participants transferred assets between 1/1/18 and 2/15/18. Of the exchanges out, 67% of the transferred dollars came out of stock mutual funds.
While there is always concern when the market plunges, history shows the market will regain the loss(es) over time.
Fortunately, our representative from MassMutual was onsite for employee meetings and was able to calm fears as well as remind them it’s only a loss on paper unless they move out of equities now.
Our clients and the thousands of employees at the DC plans we manage have been educated by us over the past 18 months about a correction and were either appropriately reallocated due their circumstances or agreed that they could weather it. I actually did not receive a single phone call.
it will go back up.
The correction seemed to be a normal reaction to the long run up in the markets
Just relax. It’ll be fine…
If you’re making transfers as a result of the recent plunge then you are already too late.
Stayed the course and let the market have its wild ride. Hold your breath and stay the course.
I actually sold some of my equity holdings when the market went over 26,000 and moved that cash into bonds and a stable value fund. I could see that correction coming a mile away. I let the rest ride in equities. I don’t need the cash yet and I learned long ago that you don’t have a loss until you sell at a loss.
My change was to increase my contribution rate. BUY LOW!!!
The “plunge” did cause me to pause with my own retirement near. However, good financial advisors will always calm you down.
Duh!
Despite all our communications efforts, participants still take a short-term approach to investing. If I had any hair left I would be pulling it out!
If you have your account set up correct to begin with you can just let it ride.
As an investor, I view market corrections as normal and an opportunity for investment; not panic.
I’m still young enough to weather storms like this (44). It’s all good 🙂
I got lucky in that my ROTH IRA contribution hit my account at the low point! I bought it on sale! 🙂
NOTE: Responses reflect the opinions of individual readers and not necessarily the stance of Strategic Insight or its affiliates.