Americans continued to save for retirement through defined contribution (DC) plans early this year despite uncertain market conditions during the lingering COVID-19 pandemic, according to ICI’s “Defined Contribution Plan Participants’ Activities, First Quarter 2021.”
The latest recordkeeper data indicates plan participants remained committed to saving: a preliminary estimate indicates that only 0.8% of DC plan participants stopped contributing to their plans in the first quarter of 2021, compared with 1.4% in the first quarter of 2020, and 2.7% in the first quarter of 2009 (another time of financial market stress).
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.
“Retirement savers are committed to saving for their futures, even during challenging times,” Sarah Holden, ICI senior director of retirement and investor research, said in a statement. “These data highlight that paycheck-by-paycheck saving and investing through DC plans provide discipline to help participants stay the course for their long-term goals.”
Other findings include:
Most DC plan participants stayed the course
As stock values edged up during the first three months of the year, only 5.5% of DC plan participants changed the asset allocation of their account balances, slightly lower than the activity observed in the first quarter of 2020 (6.2%).
This is in line with the first quarter of 2009. Meanwhile, 3.9% changed the asset allocation of their contributions in the first quarter of 2021, in line with the activity observed in the first quarter of 2020 (4.1%), and lower than 7.3% in the first quarter of 2009.
Withdrawal activity for DC plans remained low
In the first quarter of 2021, 2.2% of DC plan participants took withdrawals, compared with 1.8% in the first quarter of 2020, and 2.7% in the first quarter of 2009. Levels of hardship withdrawal activity also remained low, with only 0.6% of DC plan participants taking hardship withdrawals during the first quarter of 2021, compared with 0.8% in the first quarter of 2020, and 1.2% in the first quarter of 2009.
DC plan participants’ loan activity edged down
At the end of March 2021, 14.3% of DC plan participants had loans outstanding, compared with 14.8% at year-end 2020, and 16.3% at the end of March 2020.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
