By David Blanchett

Research Overview

This research explores participant trading activity during 2020 for 730,533 participants, with data obtained from Prudential Financial, Inc., with a specific focus on how allocating to a product that provides guaranteed lifetime income is related to participant trading. We find that participants using any type of professionally managed portfolio solution were significantly less likely to trade in 2020 than were self-directing participants. Among participants who self-directed their accounts and who traded in 2020, older participants made changes that were the most significant. These participants were also significantly less likely to use a professionally managed portfolio option, which suggests that those participants who could benefit the most from professional investment management are not the ones receiving it.

Participants who were defaulted in a multi-fund professionally managed portfolio traded less than those who were defaulted in a single multi-asset fund professionally managed strategy (e.g., a target-date mutual fund). While the exact reason for this effect is unclear, a potential explanation could be that the diversification benefits of the multi-fund strategy are more apparent than the benefits for a single multi-asset fund strategy (i.e., the participant would log in and see a fund portfolio with eight or more funds versus holding a single target-date fund, which would appear to be more like a black box).

Older participants (ages 55–70) who had higher allocations to an annuity that provided guaranteed lifetime income were less likely to trade during 2020. This suggests that guaranteed (or protected) income products have the potential not only to simplify the retirement income decision process, but also to improve participant trading behaviors.

Read the Full Paper

About the Author

David Blanchett is managing director and head of retirement research with PGIM.

Stay informed with the latest updates on protected income planning.