401(k) balances increased by 15% in 2023 while fewer participants borrowed from their accounts, finds a new report released today by Bank of America.
The organization’s fourth quarter Participant Pulse survey found that average account balances grew to $86,280 in 2023, up from $75,045 at the end of 2022. In the last quarter, one in five participants changed their contribution rate—17.7% increased their rate while 3.1% decreased, vs. 9.3% and 2.2%, respectively, in Q3.
At the same time, 2.3% of employees took a 401(k) loan, down from 2.5% in the third quarter of 2023. The average loan per participant declined to $8,210 from $8.530.
The surge in balances comes from participants who are contributing more to their plans, as 18% reported increasing their contributions in 2023, a rise from 9% the year before.
The rising value of investments, along with an 11% increase in health savings account (HSA) balances also added to the overall growth, reports BofA.
“We were encouraged to see more plan participants taking positive actions in their accounts in the fourth quarter,” said Lorna Sabbia, head of Retirement and Personal Wealth Solutions at Bank of America, in a statement. “These insights offer signs that people are prioritizing their retirement savings, with more employees increasing their contribution rates and fewer taking hardship distributions.”
As of Q4 2023, average contribution rates are up slightly to 6.5%, from 6.4% at year-end 2022. While average contributions are generally optimistic at $1,310, they are down slightly from last year’s Q3 figure of $1,430, finds BofA.
HSA savings vary by groups
BoFA’s report highlights participant’s engagement across HSAs and their feelings towards financial wellness, finding that Millennials are likelier to save more into their health savings accounts. Overall, 76% of HSA contributions were spent on health care expenses, while 24% were saved. Millennial workers saved 34% of their HSA contributions—the highest figure out of every other age cohort.
The research also found that men were likelier to invest their HSA contributions. Twelve percent of account holders surveyed invested their contributions for further growth, including 17% of men and 11% of women.
SEE ALSO:
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Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.