Press release
T. Rowe Price Publishes Latest Findings On 401k Investor Behavior During Recent Economic Downturns
Getting Smarter After Lessons Learned from the 2008 Global Financial Crisis BALTIMORE, Sept. 15, 2020 /PRNewswire/ -- A recent study by T. Rowe Price found
About this update from T. Rowe Price Group, Inc.
[{"type":"text","content":"Getting Smarter After Lessons Learned from the 2008 Global Financial Crisis\n\n\nBALTIMORE, Sept. 15, 2020 /PRNewswire/ -- A recent study by T. Rowe Price found retirement savers who were saving at an adequate rate prior to the 2008 Global Financial Crisis (GFC), and who continued to save throughout the crisis, saw the best outcomes. The 67% of retirement savers who practiced this behavior were able to weather the volatility and stay on track with their savings. Meanwhile, 44% of individuals who lacked retirement savings prior to the GFC and increased their savings in response to it, still had to consider delaying their retirement 10 years after the downturn. Both statistics reinforce the importance of developing healthy savings behavior early because making up the lost financial ground can be difficult.\n\"Looking back, the data suggest that market volatility can induce decisions that are often not in retirement savers' longer term financial best interest,\" said Joshua Dietch, vice president of retirement thought leadership at T. Rowe Price. He said 21% of those surveyed claimed to have moved money from equity funds to safer investments in their 401(k) plans in 2008 and \"interestingly, the primary differences in behavior seem to stem from the size of one's retirement balance. Those with the largest accounts were three times more likely to trade from equity funds to safer investment options (35%) than those with the smallest accounts (11%). Additionally, in 2008, nearly one in five workers (19%) recalled taking a loan or hardship withdrawal from their 401(k) plan.\"\nMeanwhile, T. Rowe Price's 2020 401(k) recording keeping data shows that investor behavior during the current financial crisis is muted compared to the 2008 behavior featured in the survey. Less than 2% of investors who solely invest in target date funds had changed their investment allocations compared to 19% of all other investors. Further, while two-thirds of T. Rowe Price's larger clients have adopted at least one of the CARES provisions to date, only 6% of the participants used at least one of the provisions. \n\"Looking back, the data suggest that market volatility can induce decisions that often will not benefit retirement savers' over the long term,\" added Dietch. \"However, today's savers have benefited from the automation of retirement savings brought o...