Only 3.9% of defined contribution (DC) retirement plan participants withdrew money from their accounts in 2019, according to a new report from the Investment Company Institute (ICI).
While that is barely up from 3.4% withdrawing money in 2018, any bets as to what the percentage will rise to in this so-far dismal year we call 2020? It will likely make you long for the good old days of 2019.
Levels of hardship withdrawal activity also remained low in 2019, with only 1.9% of DC plan participants taking hardship withdrawals during 2019, compared with 1.6% in 2018. With the CARES Act making it much easier for DC plan participants to raid their 401ks in an effort to provide relief to those impacted by the coronavirus pandemic, that’s another percentage that figures to see a big increase in 2020.
According to ICI’s “Defined Contribution Plan Participants’ Activities, 2019” report, the vast majority of DC plan participants continued contributing to their retirement savings during 2019.
The latest recordkeeper data indicate that savers remained committed to saving for their futures by continuing to contribute to their DC plans: only 2.3% of DC plan participants discontinued their contributions during calendar year 2019.
Other findings include:
- Most DC plan participants stayed the course in their asset allocations. In 2019, 8.3% of DC plan participants changed the asset allocation of their account balances, and 4.4% changed the asset allocation of their contributions. These levels of reallocation activity were slightly lower than the activity levels in 2018. The value of stocks generally rose throughout 2019.
- DC plan participants’ loan activity in 2019 was slightly lower than the loan activity observed in 2018. At the end of December 2019, 16.1% of DC plan participants had plan loans outstanding, compared with 16.7% at year-end 2018.
ICI has been tracking participant activity through surveys of plan recordkeepers since 2008. The study tracks contributions, withdrawals, and other activity based on DC plan recordkeeper data covering more than 30 million participant accounts in employer-based DC plans. This update provides results from ICI’s survey of a cross section of recordkeeping firms representing a broad range of DC plans. Visit ICI’s 401(k) Resource Center for more information.
- SEE ALSO: Good Reasons Not to Raid that 401k
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
