NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Portfolio Delegation and 401(k) Plan Participant Responses to COVID-19

David Blanchett, Michael S. Finke, Jonathan Reuter

NBER Working Paper No. 27438
Issued in June 2020
NBER Program(s):Economics of Aging, Asset Pricing

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.

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Document Object Identifier (DOI): 10.3386/w27438

 
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