Despite a published report and social media posts to the contrary, most retirees “stayed the course” with their investments earlier this year when the market crashed, according to Fidelity Investments.
Plus, the limited share of those 65 and up who did make changes generally just shifted some holdings from stocks to non-equity investments, the fund giant says.
Confusion around investor behavior during this year’s market weakening stems from a report in The Wall Street Journal last week, which initially said nearly a third of older investors, and 18% of all investors, sold all their stock holdings between February and May.
Citing that report, Michael Batnick, director of research at Ritholtz Wealth Management, tweeted the following morning that “31% of investors at Fidelity between the ages of 65-69 sold all of their stocks between February and May.”
More than 500 people then retweeted that message. (Also, Batnick referred to the same data in an online post for The Irrelevant Investor two days later.)
Wall Street Journal Correction
On Thursday, though, The Journal corrected the report, explaining: “An earlier version of this article, and a chart that was published with it, incorrectly said that nearly a third of investors ages 65 and up and 18% of all investors sold all of their stock holdings sometime between February and May.”
In addition, “of the 6.9% of investors across all age groups who made a change to their portfolio between February and May, 18% moved some money out of stocks,” it added.
As it turned out, Fidelity had “provided an incomplete data set that unfortunately inaccurately portrayed whether retirees were ‘staying the course’ or not,” Fidelity spokesman Michael Shamrell told ThinkAdvisor Monday.
The “complete data set” showed that from late February to mid-May, “less than 1 in 10 retirees (7.4%) made a change to the allocation within their 401(k) or 403(b) retirement accounts. Of that 7.4%, less than a third (31%) moved some of their savings from an equity fund(s) to non-equity fund(s) – so it wasn’t necessarily their entire account,” Shamrell said.
It’s also “important to note that this was money that was being moved within a workplace retirement account (not a retail investment portfolio), and that even the retirement savers that made a shift to non-equity funds within their retirement savings account didn’t necessarily move all their savings,” he explained.
As of March 31, Fidelity managed a total of about 25 million 401(k) and 403(b) accounts, including roughly 19 million 401(k) and 6 million 403 (b) accounts.
“While I don’t have the under-65 data, I can confirm that … for all age groups, 6.9% of retirement savers made a change to their asset allocation in the same late-February to mid-May time frame, with 18% [moving] some money out of stocks,” Shamrell added.
In other words, not much had changed since Fidelity announced April 24 that retirement savers “stayed the course” during the first quarter of 2020.
Given the change in Fidelity and The Journal’s data, “I’m going to address this story on my podcast on Wednesday,” said Batnick in an e-mail. “Mistakes happen. I’ll chalk this up to a miscommunication.”
“Despite significant volatility, only 7.3% of individuals made a change to their 401(k) allocation [in Q1 2020] , an increase from 5.2% in Q4 2019,” Fidelity said nearly two months ago. “Of those savers that made a change to their asset allocation, 60% made only one change in the quarter.
“Even among Baby Boomers, only 9.9% made a change to their 401(k) allocation, with most moving their savings into a conservative investment option,” it added.
In addition, “Among individuals saving within 403(b)/tax exempt accounts, only 5.2% made a change to their allocation, a slight increase from 4.1% last quarter. And only 3% of individuals across Fidelity’s 401(k) and 403(b)/tax exempt platform dropped their allocation to 0% equities,” the fund giant explained.
T. Rowe Price reported a similar trend on Monday, though it didn’t break down data by age. The “vast majority of T. Rowe Price 401(k) plan participants (nearly 97%) have not made a change to their investments,” Kevin Collins, head of retirement plan services at T. Rowe Price, told ThinkAdvisor.
“At 11 weeks into the market event this year (early May), we saw that 99% of participants retained their target date investments,” Collins explained.
“Of the participants that did make an exchange, they generally moved assets from equity to stable value investments. However, as markets began to stabilize, we saw movement returning to equities and target date investments,” he said.