Vanguard on Inertia and Retirement Savings

Vanguard announced that the median decline in their investors’ defined contribution accounts (401k, 403b, etc.) was down 17% from January 2008 to March 2009. That compares to the market’s 44% drop.

Vanguard’s study points out that inertia played a role in the performance. Rather than frequently trading, cancelling retirement plan contributions and withdrawing money from 401(k) plans, investors in the Vanguard plans stayed the course.

Vanguard’s study mentions, “Our results confirm that most participants maintained their retirement savings and investment programs during the downturn, and remain positioned to benefit from an upturn in stock prices when the current market decline reverses.”

It’s been a bumpy ride, but it appears there are many that are plugging away, saving for retirement and have positive views of the future for the world economy. The study was for the period ending March 31, 2009. Since the statement made by Vanguard that investors will benefit from an upturn in stock prices was made, the market is up nearly 20%.