Vanguard: Consumers leaving nest eggs largely untouched

06.13.09
By Lewis Green

It's been a tough year for individual investors with retirement money and other savings locked up in funds tracking the stock market.

Only recently have some regained ground lost during the record drops in the market over the last 15 months.

According to newly released analysis of Vanguard retirement plan participants' accounts, the median balance fell by 17 percent from January 2008 through the end of the first quarter 2009.

And although recent reports have indicated that some individuals are foregoing 401(k) and other retirement plan contributions to pay for more pressing expenses, Vanguard argues that its plan participants have mostly stuck to their original investment guidelines.

Stephen Utkus, director of the Vanguard Center for Retirement Research said, "In particular, the effect of regular contributions may be one of the reasons that most 401(k) participants tend to stay the course and do not alter their portfolios in response to falling markets."

In addition to constant contributions, many participants managed to handle urgent financial needs with cash or credit on hand rather than dipping into the money set aside for their golden years.

The number of Vanguard plan participants who took out a loan from their retirement account dropped by 12 percent last year. Early forecasts for the beginning of 2009 show even less loan activity.

Despite the tough economic times, more people are leaving their savings untouched - less than 2 percent of participants took hardship withdrawals in 2008, reports the financial services company.

"The participant activity patterns we're seeing demonstrate the resilience of most participants and the benefits of sticking to a balanced, well-diversified investment plan," Utkus said.

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Some plan participants to benefit from staying the course with investments