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Hands-off: Holders of 401(k) Retirement Accounts Are Not Your Typical Investors

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Hands-off: Holders of 401(k) Retirement Accounts Are Not Your Typical Investors

http://knowledge.wharton.upenn.edu/index.cfm?fa=viewfeature&id=1405

With $2.5 trillion invested in 401(k) retirement accounts, 60 million Americans control a powerful chunk of cash. So how much attention do investors pay to this vast pool of savings? Not much. According to a new Wharton analysis of retirement accounts managed by The Vanguard Group in 2003 and 2004, participants in 401(k) plans made little effort to tend their defined-contribution plans once they were set up. Even among those who did trade regularly, turnover rates were one-third those of professional money managers. Olivia S. Mitchell, executive director of Wharton's Pension Research Council, Stephen P. Utkus, principal, Vanguard Center for Retirement Research, and researchers Gary Mottola and Takeshi Yamaguchi present their findings in a paper entitled, "The Inattentive Participant: Portfolio Trading Behavior in 401(k) Plans."

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