Steady As They Go - investments and investors in 2000 - Brief Article

Kiplinger's Personal Finance Magazine, April, 2001

OVER THE past couple of years, 401(k) investors have become more cautious, shifting assets away from stocks to get closer to a 70-30 mix of stocks and other assets. So when year-end statements for 2000 arrived in the mail, you might have expected a knee-jerk run for cover by investors. Instead, there was nary a twitch.

"It's astonishing how many participants never react at all," says Charlie Ruffel, CEO of Plansponsor.com, a company that provides news and services related to pensions and retirement plans.

After reading all the scary headlines, "people may have been bracing themselves for something worse than their statements showed," says Monica Kirgan, director of retirement investor services for Principal Financial Group, which handles 33,000 401(k) plans. Even though the average 401(k) account returned -4% in 2000, according to the Spectrem Group, the typical participant saw his or her account balance rise by 3%, once you factor in employee contributions and employer matches. "The average 401(k) investor did better than his retail counterpart," suggests Ruffel, because 401(k) participants also tend to be more diversified.

The lack of concern among investors is good, says Ruffel, if it means that employers' education efforts have brought home to workers the long-term focus of 401(k)s. It's bad if it means that apathetic participants make an investment decision once and then forget about it. Plan members still don't set a goal for how much they need to save, says Spectrem's Ann Mahrdt. "They think that just by participating in the plan they've met the goal."