Many Investors Show Resilience, Vanguard Shares

ew Vanguard research covering the recent severe stock market downturn and ensuing recovery confirms earlier findings that retirement plan participants, either as a result of conscious resolve or inertia, mitigated damage to their retirement savings by reacting only marginally in terms of trading, contribution, and distribution behavior.

The study, “Resilience in Volatile Markets: 401(k) Participant Behavior September 2007-December 2009,” analyzed trends over that period and found that most participants adopted a “stay the course” or “path of least resistance” approach and maintained their retirement programs through the economic downturn. A small minority made changes that could undermine their long-term retirement security.

The results also show the benefits of 401(k) plan design. “Counteracting the notion that 401(k) plans and participants are in dire straits, many of these investors were able to bounce back because they were able to make regular contributions through payroll deduction and to build a balanced portfolio from among a range of options,” said Stephen Utkus, head of the Vanguard Center for Retirement Research and co-author of the report, in a statement.

Here is a summary of the findings:

* Balances: The median participant account balance grew by 33% in 2009, after a decline of 31% in 2008, reflecting the effects of both market improvements and ongoing contributions. Between September 2007 and December 2009, the median participant account balance grew by 10%, and six in 10 participants saw their account balances grow.