Recent research by Vanguard covering the stock market downturn from September 2007 to December 2009, and the ensuing recovery, confirms earlier findings that retirement plan participants 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, but that a small minority made changes that could undermine their long-term retirement security.
The study found that 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. Also, the study says, between September 2007 and December 2009, the median participant account balance grew by 10%, and six in 10 participants saw their account balances grow. In 2009, despite the ongoing market volatility, only 13% of participants traded in their retirement accounts, compared with 16% in 2008.