Investors Show Remarkable Patience as Congress Tries to Smooth Out 401k Retirement Plans

As Congress talks about the flaws inherent in allowing the 401k to be the primary vehicle for retirement savings, investors are showing amazing patience as market prices continue to fall. According to top investment firms like Charles Schwab and Fidelity Investments, even though the Dow Jones has dropped 50% since October 2007, many clients have not moved to more conservative investment options, and only a few have made adjustments to their weekly contributions

What is making investors so resilient during difficult times? According to some experts, there could be a few reasons:

• Lack of better alternatives. Possibly the #1 reason that experts believe investors aren’t making any adjustments to their contributions is because they simply don’t know of any other alternatives. Because their 401k is tied to the same investment system as many other savings options, investors feel it’s better to sit on their savings rather than make risky decisions that could result in them losing more.
• Companies match their contributions. While some companies have decreased or eliminated their matching programs, many are still making contributions to their employees’ plans. As a result, many employees have decided that they would rather benefit from these additional funds than go at it alone.
• Investors haven’t changed jobs. Experts see that the most 401k activity seems to occur when employees switch jobs. However, with so much instability in the job market, many employees are staying put. As a result, not much has changed in the financial market.

While some investors with larger accounts (over $250,000) are making subtle moves, most investors seem to be sitting on their investments as they wait out one of the worst bear markets in 77 years.

How have you made changes to your 401k contributions? How has your overall 401k investment strategy changed?