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The preponderance of data through the end of March showed 401(k)investors were mostly resistant to panic during massive marketselloffs due to the Covid-19 pandemic. But new data is showingnear-retirement target-date fund investors redeemed savings atunusually high rates during March, according to Morningstar.

The data is "a sign of how much fear gripped investors inMarch," said Jason Kephart, senior manager research analyst atMorningstar.

Investors in TDF vintages ranging from 2020 to 2035 withdrew$9.4 billion in March, marking an "unusual lack of discipline,"Kephart wrote in a research note.

Redemptions in 2020 funds were more than $5 billion in Marchalone. Another $2.3 billion was redeemed in January and February,accounting for 4 percent of all assets in 2020 funds.

While some outflows in 2020 funds is expected as they arrive attheir retirement glidepath, the rate of redemptions is considerablyhigher than in recent years. Kephart compared the rate of organicgrowth in the first quarter of 2015 to the first quarter of 2020.When 2015 funds hit their glide path five years ago, the vintagesuffered negative 1 percent in organic flows. In the first quarterof 2020, the vintage suffered negative 4 percent in organicflows.

Kephart said Morningstar's data does not distinguish betweenwhich redemptions were made as scheduled, and which were made inreaction to plummeting equity markets. That data would be availableat the individual sponsor level, he explained.

Nevertheless, the overall number clearly indicates that a highnumber of investors relative to previous years pulled assets from2020 TDFs before they retired or were scheduled to redeem savings,said Kephart.

TDFs of a 2025 vintage saw more than $4.1 billion in outflowsduring March, with 2030 vintages suffering nearly $3 billion inredemptions. 2035 funds saw about $400 million in redemptions.

"There was a ripple effect further away from retirement, whichis pretty unusual," said Kephart.

How different series fared

Vanguard's Target Retirement Series, which accounts for 38percent of the mutual fund TDF market, saw $3.13 billion ofoutflows in March, but for the quarter, still was able to attractmore than $6.8 billion across all vintages.

Vanguard investors pulled $1.38 billion from 2025 funds, almostas much as was redeemed from the 2020 vintage. The 2030 fund saw$600 million in redemptions.

"Vanguard is the bellwether for the market," said Kephart."Clearly, investors are not leaving to go to cheaper funds. It'sindicative of the overall investor sentiment and fear."

American Funds Target Date Retirement Series captured nearly $4billion in net flows for the quarter, including $53 million ofinflows during the third quarter. It's 2020 and 2025 funds hadnegative flows, but less severe than the rates for the entirevintages.

T. Rowe Price's Retirement Series had the most outflows, atnearly $4.9 billion, but Kephart said much of that is likely due toan ongoing shift from the series mutual funds to T. Rowe'scollective investment trust series.

The tumultuous quarter for TDFs serves as a reminder forsponsors to stay on top of their target date providers.

"Everyone has a plan until they get punched in the face," saidKephart. "Sponsors will want to double check funds' glidepaths andwhether they are appropriate for the people they are picking themfor," added Kephart.

Total TDF assets ended the quarter at $1.17 trillion, down 15percent from the $1.37 trillion in the funds at the end of2019.

The good news for retirement savers is that despite the reallyrough ride of late, 2019's strong returns and healthy contributionrates to TDFs have left assets in the funds higher than they wereat the end of 2018.