Participants in defined contribution plans demonstrated resolve, resilience and faith during the first nine months of 2009, according to new Investment Company Institute research.
Although the market experience was “unsettling” from late 2007 through 2008, participants in DC plans “don’t share the doubts” that were expressed by legislators or in media headlines, Paul Schott Stevens, president and CEO of ICI, said today at a news conference.
“There’s been no panic among defined contribution participants,” added John J. Brennan, chairman emeritus of The Vanguard Group, who joined Mr. Stevens and Mellody Hobson, president of Ariel Investments, in discussing the ICI survey results. “People behaved as they should.”
The bottom line on investors’ attitudes, Mr. Stevens said, is “don’t take away my 401(k).”
ICI conducted two surveys in 2009 — record keepers of DC plans covering nearly 24 million accounts through the first nine months of 2009 and telephone interviews with 3,000 households conducted in November and December.
“During this time of market volatility, DC plan participants have not tapped their accounts any more than in the past,” ICI said. Only 2.6% of plan participants took withdrawals from their retirement plans during the first nine months of 2009 compared to 3.9% for all of 2008. The percentage of hardship withdrawals was 1.3% for both periods.
For the first nine months of last year, 5% of participants stopped contributing, while 3.7% stopped contributing throughout 2008.
The ICI survey said most participants who were surveyed praised DC plans for helping them think about long-term investing goals and making it easier for them to save via payroll deductions. “Four in 10 DC-owning households indicated they probably wouldn’t be saving for retirement if it weren’t for their DC plans,” ICI said in a report about the survey.
Also, most participants as well as those with no DC plans rejected ideas of possible structural changes, such as removing tax advantages of DC accounts, reducing the amount that individuals can contribute to DC accounts and replacing all retirement accounts with a government bond.
Participant opposition ranged from 87% to 91% on the possible structural changes, while the non-participant group’s opposition ranged from 70% to 82%.