Few people shifted 401(k) assets in ‘08, even as stocks slid

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Relatively few people shifted assets in their 401(k) retirement savings plans last year, despite the stock market crash that began in September, new data show.

Retirement plan administrator Mercer, which oversees 401(k) accounts for 1.2 million Americans, says just 14% of plan participants made any kind of exchange of assets within their accounts last year.

Those who did, however, naturally ran for safety, shifting money from stock funds to money market funds and ‘stable value’ accounts, Mercer said.

Mercer’s data on the relatively low percentage of people who made changes in their 401(k)s jibes with much of what I’ve heard from financial planners and other advisors. The market crash happened so quickly in the fourth quarter that many investors had no time to react -- or were simply frozen with fear.

Two other trends Mercer saw among its plan participants: a jump in the number of people requesting outright withdrawals from their accounts, particularly in November and December; and a ‘steady increase’ in the number of people who stopped contributing to their plans altogether.

‘Overall, Mercer has seen more participants decrease rather than increase their contribution rates throughout 2008, a trend rarely seen in more stable economic times,’ the firm said.

The number of people withdrawing funds or reducing contributions to zero was relatively small, ‘averaging less than 1% in both cases,’ the firm said. Still, the trends are troubling, it said.

Right, but chances are people who are pulling money out of retirement funds, or who stop contributing to their plans, are doing so because they’re in severe financial straits.

Having food on the table tonight takes precedence over funding a retirement that may be years away.

-- Tom Petruno