Despite market volatility, inflation, and lingering concerns of a recession, recent Investment Company Institute (ICI) research shows defined contribution (DC) plan participant withdrawal activity remained low in recent years.
According to ICI’s research report, “Defined Contribution Plan Participants’ Activities, 2022,” 4.1% of DC plan participants took withdrawals in 2022, compared with 4.1% in 2021 and 3.8% in 2020. The report also compared numbers to data from as far back as the last period of market stress in 2008, finding that 3.9% of DC plan participants took withdrawals in 2019 and 3.4% withdrew in 2009.
While hardship withdrawals increased in 2022, levels remained low in absolute terms. In 2022, 2% of DC plan participants took hardship withdrawals, compared with 1.7% in 2021, 1.4% in 2020, 1% in 2019 and 1.6% in 2009.
When it came to contribution activity, DC plan participants stayed the course, with 2.5% halting contributions in 2022, compared with 2.2% in 2021 and 2.3% in 2020. This was relative to 2.3% in 2019 and 3.4% in 2009. According to ICI, DC-owning individuals indicated that their employer-sponsored retirement account helps them think about the long term, not just their current needs. In addition, saving paycheck-by-paycheck made about eight in 10 DC-owning individuals surveyed less worried about the short-term performance of their investments, says ICI.
ICI notes how DC plan participants have likely felt ongoing financial stressors stemming from the COVID-19 pandemic, even as the penalty relief and increased flexibility in plan withdrawals under the Coronavirus Aid, Relief and Economic Security (CARES) Act has been unavailable for the past two years.
While stock values generally fell last year, 8% of DC plan participants changed the asset allocation of their account balances, slightly lower than 9.1% in 2021, 10.6% in 2020, 8.3% in 2019, and 11.8% in 2009, according to ICI. Four percent of plan participants altered the asset allocation of their contributions, compared to 5.3% in 2021, 6.3% in 2020, 4.4% in 2019, and 10.5% in 2009.
On the loan side, outstanding loan activity rose to 13.3% in December 2022, compared to 13% in September 2022, and 12.5% at the end of June 2022, March 2022, and December 2021. Despite the heightened current loan activity, ICI describes how the availability of coronavirus-related distributions (CRDs) in 2020 may have resulted in reduced loan activity then.
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- Total Retirement Assets Fell in Q3 2022
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
