Retirement plan participants with all of their savings in a target-date fund are the most likely to stay the course during tumultuous equity markets, according to research from T. Rowe Price.

Analysts measured participants’ trading activity during the summer of 2011 and 20 other periods of market volatility over a seven-year period.

The good news is that retirement plan participants overwhelmingly tend to stay the course during market downturns, no matter how they are invested.

During August 2015 and January 2016, when the Dow Jones Industrial Average lost 6.6 percent and 5.5 percent, respectively, less than 2 percent of T. Rowe Price participant clients took any action with their retirement plans, which was consistent with seven other periods of volatility since 2006. During the summer of 2011, participant activity spiked above 2.5 percent, the highest of the periods examined.

During the latter period, about 30,000 participants traded in response to market volatility, with participants age 50 to 64 being the most likely to move assets. Half of the trades were to move equities to less risky fixed income.

Over all of the periods examined, participants with 100 percent of their assets in TDFs were the least likely to trade, while those with only a portion of assets in TDFs were nine times more likely to trade, about equal to those participants with no assets in TDFs, according to T. Rowe Price.

Low trading volume during market downturns does not mean participants were not aware of the cycles, as call volume spiked during the most recent downturns. Of the participants surveyed during the volatility during March of this year, 48 percent said they were concerned about the long-term performance of their retirement assets, but 74 percent said they were not planning to make any changes.

While market downturns do cause anxiety, T. Rowe Price says they can also offer the chance to engage participants.

During 2015, the provider said it held more than 7,000 one-to-one phone consultations focusing on deferral rates and asset allocation.

More than half of those participants took some action resulting from the consultations, with 22 percent changing deferral amounts, and 37 percent adjusting asset allocations. Of those that did reallocate, 89 percent moved to a TDF, one-third of whom moved all of their assets to a TDF.

Instant Insights /

Target-date fund participants least likely to react in down markets

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