It’s like rubbernecking after a car accident: The market sinks dramatically, as it has for most of 2016, and virtually everyone with a 401(k) plan suddenly can’t look away from the wreckage.
The rule of thumb for 401(k) plans during market volatility is to, in fact, do nothing. As T. Rowe Price’s best-practices guide explains, markets have enjoyed a 75-year stretch of increases. Peoplewho keep their retirement money invested over the long haul do better than thosewho try to predict downturns. During the financial crisis, for example, Fidelity found that thosewho didn’t take money out of their plans saw88 percent growth over the next five years. Saverswhomoved assets out of equities in 2008 and remained thatway for the next five years saw15 percent growth.
The good news: Americans with 401(k) plans may have learned the lessons. Even during the financial crisis, only 1 percent of Fidelity’s plan holders got completely out of equities. In any given year, on average, 10 percent of Fidelity plan holders will move money between funds. Bloomberg News