The average 401(k) account balance among men is 50% greater than women’s overall ($89,000 vs. $59,000), but the gender imbalance is closing among younger generations.
“The gender savings gap is an issue we can and must address. It carries personal implications for many, as well as macroeconomic implications for us all.”
Bank of America’s Lorna Sabbia
That’s a key finding in Bank of America’s 2023 Financial Life Benefits Impact Report, released today. The report reveals that Baby Boomer and Gen X men have significantly greater account balances than women in their generations (87% vs. 53%, respectively). Boomer men have an average account balance of $179,688 compared to $95,839 for women while Gen X men have $123,177 vs. $80,473 for Gen X women. However, the gap between Millennial men ($29,218) and women ($23,715) is only 23%.
“The gender savings gap is an issue we can and must address. It carries personal implications for many, as well as macroeconomic implications for us all,” said Lorna Sabbia, Head of Retirement and Personal Wealth Solutions at Bank of America. “We are encouraged by the strides young, female employees are making, and want to encourage everyone to invest in their futures and leverage the workplace benefits available to them.”
401(k) balances dip 17% in 2022
Overall 401(k) account balance averages declined by 17% (to $75,000 in 2022 from $90,000 in 2021), which the BofA report says is presumably due to stock and bond market declines in 2022. Similar findings have been reported this year by Fidelity, Charles Schwab, and Vanguard.
The BofA analysis finds 72% of 401(k) participants have an account balance of less than $50,000, while only 10% have balances of $50,000-$100,000 or $100,000-$250,000. Eight percent have balances of more than $250,000. Overall, just 12% are on track for retirement–meaning they have saved at least 75% of their target savings amount to date.
Based on data across Bank of America’s proprietary employee benefits programs, which serve more than 25,000 companies and more than 6 million employees, the Financial Life Benefits Impact Report examines trends within 401(k) plans, Health Savings Accounts (HSAs), equity compensation and employee banking programs.
When looking at 401(k) plans recordkept by BofA as of the end of last year:
• Participation rates dropped only slightly to 56% from 58% in 2021. Gen X continues to have the highest 401(k) participation rate (65%) across generations, followed by 57% of Baby Boomers and 55% of Millennials.
• The average contribution rate declined to 6.4% from 6.6% in 2021. 26% of participants increased their contribution rate while just 8% of participants decreased their savings rate.
• The number of participants contributing small amounts (less than $5,000) increased to 66% (from 61% in 2021), while only 9% took full advantage of their 401(k) plan by contributing the maximum amount allowed.
• When 401(k) plans include an auto-enroll feature, most employees (85%) participate, compared to just 36% participation without this feature. Plans with auto-enroll that also have auto-increase rose (57% vs. 55% in 2021).
• When it comes to 401(k) loans, BofA found 15% of active participants have a loan (same as 2021) and the average 401(k) loan balance is $8,143, which is down slightly from 2021. And 1.6% of participants took a hardship distribution in 2022, up from 1.2% in 2021.
Employees leveraging other benefits
In addition to 401(k) savings plans, employees are leveraging other benefits such as health savings accounts (HSAs), equity awards and other financial resources to pursue their goals. Top findings related to these benefits include:
• More employees received equity awards in 2022, though values were lower. 23% more participants received awards in 2022 than in 2021. However, there was a 16% decline in average shares outstanding per plan and a 30% decline in the value of outstanding shares at year-end.
• HSA account holders are evolving from “spenders” to “savers.” More account holders contributed more than they withdrew (38% vs. 26% in 2021). The average HSA account ($4,077) declined by 6% in 2022, and more assets were held in cash deposits (58%) compared to longer-term investments (42%).
• Financial education resources are top of mind. Employees are eager for education, with top interests including retirement (70%) and budgeting (23%). Participants would prefer to learn by attending a webinar (69%), followed by a short video (36%) and visiting a website for information (31%).
• Participants want to engage digitally. 63% of participant visits were online, followed by 22% engaging via mobile apps and 15% through call centers.
“Employers serve an important role in ensuring that their employees are equipped with the best possible tools, resources and solutions for financial success and retirement planning,” said Kevin Crain, Head of Retirement Research & Insights at Bank of America. “We’re committed to working with employers to meet the needs of their employees, wherever they are in their financial journey.”
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• Retirement Account Balances Increase Across the Board