Stay-the-course has been etched into savings habits since the last great meltdown ultimately churned higher account balances.
Reports after the 2008-09 financial crisis showed those who didn't abandon equities and didn't dial down contributions actually got rewarded when markets rebounded. This downturn remains a defining moment for participant consistency, showing simple inertia – while it might not be favorable in the end – can actually be practical in order to ride out a market storm.
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Studies show this path paid off at the end of first quarter when, according to Fidelity, account balances hit an all-time high at an average $75,000. It paid off again at the end of the second quarter, when those participants who stuck with an allocation that included equities saw a 50 percent increase (compared to 2 percent for those who didn't want to take the risk).
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And those who continued making regular contributions saw a balance increase of 64 percent, compared to 26 percent for those who stopped socking money away. (Of course, we might have to assume that money was reserved for more immediate expenses.)
Participant transactions peaked in recent weeks, but apparently not enough to signal a seismic shift toward panic mode. And economists are at all angles on their forecasts, with some calling for a modest recovery — enough to stave off recession — while others worry the seesaw will delay the upswing.
But if I've heard one thing over and over, it's to not overreact—not yet. Despite the recent huge sell-off, advice continues to echo the logic of having a properly diversified portfolio, keeping up with an effective contribution rate and steady savings. Plus, you have to figure that investing in a down market does have its upside potential.
Retirement plans are never one-size-fits-all, but if these account studies are any indication of the months ahead, here's hoping participants are too scared to move or just too apathetic to get off the roller coaster.
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