Despite increased inflation and market volatility in the first half of 2022, 401(k) participants have not changed their loan, distribution, or withdrawal behavior significantly, according to a new report from T. Rowe Price.
Participants who invested fully in target date products continued to exchange between investment choices at lower rates than plan participants at large. More than 99% of participants who invested fully in a target date product did not make an exchange.
The research also saw that while distribution rates have normalized since the height of the pandemic, financial hardship withdrawals increased slightly in the first half of 2022 compared to the previous two years. This is largely due to the fact that special COVID-related distributions are no longer available.
The Q2 Reactions Report also found that participants consumed a greater amount of digital retirement planning and savings content during the second quarter of 2022, specifically around financial wellness. These popular programs focused on budgeting, retirement readiness, and maximizing 401k plans.
“While we are seeing difficult economic conditions, we are encouraged to see participants continuing to maintain savings levels and take advantage of retirement education”
T. Rowe Price’s Rachel Weker
“While we are seeing difficult economic conditions, we are encouraged to see participants continuing to maintain savings levels and take advantage of retirement education,” said Rachel Weker, senior retirement strategist for Retirement Plan Services at Baltimore, Md.-based T. Rowe Price. “For those participants who consume additional education, we are seeing overall fewer distributions as they continue to stay the course.”
One other notable finding is that longer-tenured employees’ average deferral rate is 48% higher than the average for new hires.
The report examines retirement behavioral trends and correlations between the challenging economy and job tenure with rates of savings for retirement. The information is based on an analysis of 613 plans covering more than 2 million participants, each with approximate assets greater than $25M recordkept by T. Rowe Price Retirement Plan Services, Inc. through June 2022.
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