NEW YORK — While pro­fessional traders on Wall Street scrambled to sell stocks amid a fear-fueled, nearly 20% drop for the S&P 500 late last year, most people at home remained relatively calm when it came to their own retirement savings.

So say numbers from Fidelity Investments, which show that the vast ma­jor­ity of 401(k) par­tic­ip­ants continued to sock sa­vings away in their ac­counts and refrained from the perhaps-tempting choice to abandon stocks and hide out in the safety of cash.

Investors held the stead­fast approach even as the average 401(k) bal­ance dropped to $95,600 by the end of the year, down 10% from three months earlier. The chief culprit was a fear about a possible recession, which sent the S&P 500 down 19.8% between setting its latest record high on Sept. 20 and hitting a bottom on Christmas Eve.

It’s an encouraging sign because stocks have his­tor­ically provided the best returns over the long term. So, as long as someone is willing to stom­ach such bouts of vo­la­tility and hold on for years, owning stocks is one of the best ways an investor can have a bigger pot to pay for retirement.

“The most encouraging thing is that most people didn’t have a knee-jerk reaction, and they con­tin­ued to save or increased their savings rates” said Jean­ne Thompson, senior vice president at Fidelity. “This is the proof that the messaging has gone through. We’ve come a long way in the last 10 years.”

Much of the credit goes to one of the most pow­er­ful forces in investing: in­er­tia. Peop­le often lean toward making no chan­ges, particularly when it in­volves something as big and complicated as saving for retirement. Employers and the investment in­dus­try have tried to har­ness that for good by auto­matically enrolling work­ers into 401(k) plans, auto­matically setting them up to increase their con­trib­utions each year and automatically placing their savings into target-date retirement funds.

That way, if workers take no action with their 401(k) accounts, they’re still saving a portion of each paycheck and put­ting their money into in­vest­ments that are ap­pro­priate for their age. Last quarter, 99.1% of all 401(k) participants at Fid­el­ity continued to reg­u­larly contribute, the high­est percentage since early 2011.

Target-date funds take care of how to divvy up an investor’s nest egg, and they keep a lot of money in stocks when retirement is decades away and shift to bonds as time goes on.

Recommended for you

(0) comments

Welcome to the discussion.

Keep it Clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
Don't Threaten. Threats of harming another person will not be tolerated.
Be Truthful. Don't knowingly lie about anyone or anything.
Be Nice. No racism, sexism or any sort of -ism that is degrading to another person.
Be Proactive. Use the 'Report' link on each comment to let us know of abusive posts.
Share with Us. We'd love to hear eyewitness accounts, the history behind an article.