DC plan participants hold fast despite virus-roiled markets – Vanguard

The behavior of retirement plan participants "remained largely unaffected" during the tumultuous first four months of 2020 despite greater market turmoil and financial uncertainty, Vanguard Group said Wednesday.

"Participants remained unflappable and focused throughout the recent market volatility," said Martha King, managing director and head of Vanguard Institutional Investor Group, in a news release.

As of March 31, Vanguard had more than $1.3 trillion in defined contribution assets under management in 1,800 plans that covered 5 million participants.

"Participation and deferral rates have remained steady during the first four months of 2020," according to a supplement to Vanguard's annual "How America Saves" report, covering actions by participants and sponsors for which Vanguard serves as a record keeper.

"While trading increased during the first four months of 2020," the supplemental report said, "95% of participants did not make an exchange. Importantly, less than 1% panicked and abandoned equities."

In April, the average account balance for Vanguard participants was $101,771, down 4% from Dec. 31.The median balance was $25,570, down 1% from year-end.

However, when Vanguard looked at so-called continuous participants — those with account balances in April 2019 and in April 2020 — the median balance rose 5%.

"Nearly two-thirds of these continuous participants saw their balances rise, primarily because of ongoing contributions, the report said.

Vanguard also noted that target-date fund investors were less likely to trade than other investors during market volatility.

"Through April 2020, only 1.7% of all pure target-date investors made an exchange, a rate five times lower than all other investors," the report said. "Pure" target-date investors in DC plans have all of their retirement money in this investment option.

"As many workers face a variety of financial uncertainties, the overall behaviors in retirement plans have remained steady, and the majority of participants have continued to maintain a long-term view with their retirement plans," the report concluded.