Portfolio Delegation and 401(k) Plan Participant Responses to COVID-19

David Blanchett, Michael Finke and Jonathan Reuter

No 27438, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We analyze the behavior of 401(k) plan participants during the first quarter of 2020, when COVID-19 generated historic volatility, large negative returns, and significant unemployment. Only 2.1% of participants invested in TDFs made any changes to their portfolios, with even lower rates of change among those defaulted into robo-advised managed accounts, suggesting that delegation can decrease the likelihood of portfolio mistakes by less sophisticated participants. While 16.6% of non-delegated participants made portfolio changes, these changes were more likely among more sophisticated participants and appear not to have reduced participants’ quarterly returns. Consistent with liquidity constraints, however, withdrawals spike following job loss.

JEL-codes: G11 G23 G41 G51 G53 (search for similar items in EconPapers)
Date: 2020-06
Note: AG AP
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Citations: View citations in EconPapers (2)

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