Plans with Automatic Features Boast Stronger Account Balances
Retirement plans with automatic features tend to have higher account balances compared to those without, reports the latest research from Bank of America’s Workplace Benefits team.
The Q2 Participant Pulse finds that 401(k) plans with auto-enroll and auto-increase features have an average account balance of $50,000 more than the overall average, for a total of $158,000 compared to $107,000.
401(k) participants reported average contribution rates of 7.2% as of June, while the average contribution was $1,640 in Q2. This was a decrease from Q1, which reported an average contribution of $2,080 but still comparable to Q2 2024 at $1,570. Close to nine in 10 participants kept the same contribution rate in Q2, yet retirement account balances increased nearly 9% from the prior quarter.
“With rising retirement account balances, participants contributed less and withdrew more this quarter,” BofA reported in its findings.
The number of participants borrowing from their workplace plan slightly increased in Q2 to 2.4%, up from 2% the quarter prior, but the average loan per participant marginally declined to $9,700 compared to $9,960 in Q1. Over eighteen percent of participants have an outstanding loan, but Gen Xers led among age groups with the most unresolved loans.
Average balances for health savings accounts (HSAs) also grew this quarter to $5,500, up from $4,930 as of June 2024 and 37% of account holders contributed more to their accounts than they withdrew. Close to three-quarters (72%) of contributions were spent on health care expenses—a 10% increase from last quarter—while 28% were allocated to savings.
Gen X participants contributed the most to their accounts, at $1,155, and Millennials saved the largest portion, at 38% of their contributions.
Others focused on investing their HSAs. Fifteen percent of account holders said they’re investing for potential future growth, an increase from 14% at year-end 2024. Men (20%) were likelier than women (13%) to use the investment feature of an HSA, along with Baby Boomers (18%) when compared to other age groups.
Given the above findings, Bank of America found that participants reported an average financial wellness score of 49 out of 100, also consistent with Q1. Workers with a household income of over $100,000 felt more financially secure with an overall score of 59.
SEE ALSO:
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.
