Automatic 401k Plan Features Proved Themselves in Market Meltdown

401k, automatic enrollment, retirement, Vanguard

They did their job.

Score one for the “auto” revolution.

Automatic plan features helped millions of 401k participants adhere to their financial goals, even amid severe market volatility resulting from the coronavirus pandemic, according to Vanguard’s 2020 edition of How America Saves.

The investment behemoth, with $1.3 trillion in DC assets under management as of March 31, also surveyed its 5 million participants about their behavior during the pandemic, the results of which were encouraging, to say the least.

“Participants remained unflappable and focused throughout the recent market volatility,” Martha King, managing director and head of Vanguard Institutional Investor Group, said in a statement. “This tremendous display of discipline in the wake of uncertainty is a testament to the effectiveness of world-class plan design championed by Vanguard and our plan sponsor partners.”

Automatic plan features

Over the last two decades, innovations in default investment options, automatic enrollment and savings rates drove higher participation and savings rates, along with declines in extreme allocations and reactive trading behavior.

Drawing from its defined contribution data, Vanguard found that prudent plan design can help withstand a host of market conditions.

Key findings from How America Saves include:

Participant behavior in the pandemic

Automatic plan features and professionally managed allocations helped nearly 95% of participants stay the course during financial uncertainty.

Among the highlights:

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