Table 11
401(k) Participation Given Eligibility (percent)
Age Category (years)
Income
(thousands of dollars)
2535
3545
4555
5556
All
<10
80
58
73
85
71
1020
63
68
52
68
63
2030
70
60
58
49
62
3040
74
64
59
73
67
4050
74
69
82
68
73
5075
76
67
75
84
73
>75
86
84
88
86
86
All
74
68
72
72
71
Source: James M. Poterba, Steven E. Venti, and David A. Wise, "Do 401(k) Contributions Crowd
Out Other Personal Saving?" Journal of Public Economics 58 (1995):132.
In all but one income bracket, "Generation-
kept their eyes on the the long-term goal,"
Xers" (aged 2535) are participating in work-
wrote David Wray, president of PSCA, after a
place investment programs at higher rates
precipitous market decline late in the summer
than late Baby Boomers (3545). But more
of 1998. "According to Hewitt's 401(k) Index,
astonishingly, they are outpacing every age
on August 31, 401(k) participants as a whole
bracket of preretirement workers, driving up
moved less than one quarter of one percent of
the overall participation rate.
their assets. And on September 1, the heaviest
How committed are DC account holders
trading day in history, participants only reallo-
to long-term savings?
cated approximately one tenth of one percent
of the total value of their account balances."5 4
Despite the problem of leakage, dis-
cussed above, most data indicate that work-
There is ample evidence to suggest that most
ers are mindful of the future. A 1993 study
worker-investors, while paying close attention
The chief impedi-
of 401(k) plan participants by John
to markets, are unimpressed by short-term fluc-
ment to the
Hancock Financial Services found that only
tuations. Asked why they invested, respondents
expansion of
4 percent of participants withdrew money
to the Nasdaq's 1997 survey agreed, 44 to 6,
from their plans over the previous two
that "over the long run, stocks consistently out-
worker capitalism
years. The 1997 Retirement Confidence
perform other investments" rather than "stock
was the philoso-
Survey found that only 18 percent of 401(k)
prices have been increasing in recent years."
phy that the
participants had any intention of using
Asked to contemplate a situation in which
their accounts for anything other than
stock prices "were generally to go down signifi-
worker's status as
retirement, even home purchases.5 3
cantly in the next year," 8 percent said they
a capitalist should
would sell to avoid further losses, 31 percent
Do the New Investors Panic?
said they would increase their equity holdings
be kept hostage to
to take advantage of lower prices, and 54 per-
During periods of market turmoil, worker-
the specific
cent said they would make no major changes at
investors have held their ground. "Hewitt
for tunes of his
all. The contemporary small investor is any-
Associates research shows that throughout
thing but skittish.5 5
the recent market changes, 401(k) participants
company.
18