Separate studies of participants in 401(k) plans served by Vanguard and Charles Schwab showed that participants held firm on their investments in 2009, while more plans provided investment advice for their workers.
The Vanguard study of 3.2 million participants showed that 13% traded in their retirement accounts in 2009, down three percentage points from a year earlier. Employee contributions dipped slightly to an average 2.9% of pay in 2009, down from 3.1% in 2008.
However, the percentage of loans outstanding increased to 18% in 2009 from 16% in 2008. Hardship withdrawals were also up slightly to 9%, from 8%.
Steve P. Utkus, director of the Vanguard Center for Retirement Research and co-author of the report, said in an interview the results show that participants are largely staying the course with their 401(k) plans.
“I think part of the issue is there are big changes in small numbers,” he said, noting that small groups panicked during the credit crisis, but the vast majority made no change to their retirement savings.
The sustained commitment to 401(k) plans could be a result of employers' decisions to institute automatic enrollment, automatic savings increases and other methods of ensuring increased employee retirement savings.
He said plan sponsors should educate those who have abandoned their plans that “the market collapse has ended, that they overreacted and need to get back into the plan.”
In the Schwab study of 1.5 million 401(k) plan participants, 70% made investment advice available to participants last year, up from 62% a year earlier.
Sixty-eight percent offered target-date funds in 2009, compared to 65% in 2008; and 35% of employers automatically enrolled new employees into their plans, up from 33% in 2008. Of the plans automatically enrolling employees, 34% were automatically increasing savings rates in 2009, up from 30% in 2008.
“Of all the features provided in a 401(k) plan, access to advice can be one of the most powerful resources for helping people meet their savings goals,” Dean Kohmann, vice president of 401(k) plan services for Charles Schwab Retirement Services, said in a news release.
“For example, among the retirement plans we serve at Schwab, approximately 70% of participants that receive and implement 401(k) advice make a change to their deferral rates, and we see those savings rates nearly double on average as a result, jumping from 5% to 10% of pay.”