401(k) plan participant behavior staying the course in first half of 2022
Amid market volatility, employees have not changed their loan, distribution, or withdrawal behavior significantly, says new report.
More than two years of a pandemic and the changing nature of work and yet 401(k) plan participants did not significantly change their investing behavior. A new T. Rowe Price report, The Q2 Reactions Report, says reactions to increased market volatility and inflation shows that participants have not changed their loan, distribution, or withdrawal behavior significantly, for example.
The report also notes that more than 99% of participants who invested fully in a target date product did not make an exchange, participants accessed three times more retirement planning and savings content than in the same period last year, longer-tenured employees’ average deferral rate is 48% higher than the average for new hires, and hiring and termination rates reached five-year highs in the first half of 2022.
“Our research shows that educational content reinforcing the value of leaving money in the plan and maintaining/increasing deferral levels impacts behaviors,” says Rachel Weker, Senior Retirement Strategist for Retirement Plan Services at T. Rowe Price. “And we also know that inertia plays a large role in savings behaviors, hence the importance of automatic enrollment and automatic increase programs. Contribution rates tend not to change much.”
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The content being consumed by plan participants focused specifically around financial wellness, budgeting, retirement readiness and maximizing 401(k) plans.
“Interestingly, even during the pandemic when some people were taking money from the plan, we often saw contribution rates increasing from those same people taking money from the plan,” she adds. “The hypothesis being that even when people have an immediate need for money, they recognize the importance of rebuilding their balance for the future. For those participants who are fully invested in target date funds, only 0.2% made an exchange compared to 6.4% of participants not at all invested in target dates.”