Whenever there’s a stock market shock, experts counsel defined contribution plan participants to “stay the course” — only to see some savers veer off course from long-term strategies and into frantic trading.
President Trump’s tariff-induced market gyrations are the latest example of a shock that has generated higher-than-usual trading in retirement accounts, transfers from equities to fixed income, and accelerated inquiries to record-keepers’ call centers and online services about whether the sky is falling.
Despite the vigorous trading in early April, rapid traders still represent a fraction of the retirement investing universe, said Robert Austin, Alight's head of thought leadership.
“Most people are staying the course,” he said. “Most people are not making those knee-jerk reactions to the market.”
If current investor behavior follows previous reactions to market declines, investors who quickly trade out of stocks will be slow to return, Austin added. “They will wait for the stock market to come up” before returning to equities, he said.
Regrettably, selling low and buying high is “typical behavior,” Austin said. Very few retirement plan investors will take a buy-on-the-dip approach with their accounts.
Participants in 401(k) plans traded more often on April 7 than any other day since March 12, 2020, in the early days of the COVID-19 pandemic, Alight reported April 8.
The trading on April 7 reflected participants taking the weekend to reflect on the April 4 stock market dive when the S&P 500 index lost 6% and the Dow Jones Industrial Average declined 5.5%, Austin explained.
Daily trading volume was 9.7 times the average as tracked by the Alight Solutions 401(k) index, and April 7 represented the fifth-heaviest trading day since Alight started its index in 1997. The index is based on 401(k) trading activity of more than 2 million people with more than $200 billion in collective assets.
The $290 million in net trading activity on April 7 was the 10th highest in the index’s history, an Alight report said.
The April 7 trading “was about a month’s worth of net trading,” said the report, comparing one day to the average monthly trading level between January 2021 and December 2024.
Like others in this article, Austin was interviewed before Trump announced a 90-day pause on many tariffs on April 9, triggering a 7.9% increase in the Dow Jones Industrial Average and a 9.5% gain in the S&P 500 index. The next day, however, the former fell 2.5% and the latter lost 3.46%.
Meanwhile, the U.S. Treasury market, which suffered sharp selling early in the week, appeared to become more calm after Trump announced his 90-day tariff pause.
Austin said the early days of the COVID pandemic in March 2020 produced more intense trading — some days trading was 12 or 13 times the normal rate — than during the current tariff turmoil.
Alight’s clients preach long-term thinking to their participants, and some have employed “volatility alerts” from Alight on their websites to provide context on market churning. Alight offers an alert that automatically pops up if the stock market falls 2% in one day or 3% over two days.
Michael Volo, principal and financial adviser for CAPTRUST Financial Advisers, said his firm’s advisers “are seeing what’s consistent with” the early April numbers announced by Alight.
Some participants are moving money to fixed income, or to money market funds, he said. “Some investors don’t want the stress of volatility.”
Among those trading, most aren’t in target-date funds, he said. “Target-date holders tend not to react to market volatility.”
Volo said his firm emphasizes market history to participants, adding that recent volatility “is no way unprecedented.”
He pointed out that the typical 2025 target-date fund was down about 4% for the year as of April 8; but over five years, the average annual return was up 7%.
“You have to understand context,” he said. “We hope investors stay disciplined.”
Providing context
Record keepers can do a better job providing context to retirement plan participants by providing more individualized historical data, said Kelli Send, co-founder and senior vice president for financial wellness services at Francis, a consulting firm.
Record keepers should show more than a year’s worth of individual investment returns, said Send, adding that 10 years’ data would give participants a better understanding of their investment trends.
Francis officials show investors the S&P 500 index action over the years to provide a greater understanding of volatility and stock-market rebounding, she said.
For the latest market shock, Send said there’s a higher volume of participants’ calls — approximately 8% to 9% during March and early April vs. 2% in January-February and 2% for all of 2024.
Despite the higher volume of calls, “we don’t think people are making a lot of changes,” she said. “What we’re hearing is a lot of discussion.”
Francis officials recommend participants “should stay in place,” Send said. “As long as they are diversified and are age-appropriate investing, we tell them to ride it out.”
In April, market volatility was prompting participants to contact TIAA’s call centers and log onto online services at a higher than usual rate focusing more on getting information than making trades, said James Mullery, executive vice president for institutional relationship management.
In an email, a spokesman said call center volume was up 15% during the first week in April and up 30% between April 7 and April 10.
“We have people reaching out seeking insight and education,” Mullery said. Among those making internal transfers to fixed annuity from equities, the activity “was close to levels” in March 2020, the early days of the COVID pandemic.
Among internal transfers, a spokesman wrote that TIAA Traditional, the 107-year old fixed annuity, was a popular refuge for participants switching from equities.
The TIAA mantra to participants is to remain consistent and don’t panic, Mullery said. “The vast majority” of participants are following their long-term plans, he added.
To provide information on market volatility and investing, TIAA has augmented emails to participants with webinars requiring registration.
Participants in T. Rowe Price retirement plans did little trading April 3 and 4, according to the latest available data, a spokeswoman wrote in an email.
“Despite recent market volatility, more than 99% of T. Rowe Price Retirement Plan Services participants did not make an exchange, indicating that retirement savers are largely staying the course,” she wrote.
Participants who made an exchange primarily moved savings from equities to money market funds.
“T. Rowe Price saw a 27% increase in participant website visits between April 3 and 4, compared to the same time period in March,” she wrote. There was a 9% increase in call volume on April 3 and 4.
“Experience suggests that wholesale portfolio moves at this juncture are likely to be wrong as immediate market reactions are usually as much about positioning as thoughtful fundamental thinking,” a T. Rowe Price website said.
“Take a coffee (before the price of your latte is subject to tariffs) and give yourself some time and space to think. What does this mean in the medium and longer term?”
