Despite the volatile stock market, retirement saving continued to be a strong focus for defined contribution (DC) plan participants through the first half of 2022, according to new research from the Investment Company Institute (ICI).
DC plan assets represent more than one-quarter (27%) of the total retirement market and about one-tenth of U.S. households’ aggregate financial assets at the end of the second quarter of 2022.
ICI’s DC Plan Participants’ Activities, First Half 2022 Study
“Defined contribution plan participants generally stayed the course with ongoing contributions, and withdrawal activity remained low in the first half of 2022,” said Sarah Holden, ICI senior director of retirement and investor research. “Plan participants held steady with their asset allocations despite stock values generally declining in the period.”
The study, “Defined Contribution Plan Participants’ Activities, First Half 2022,” found most DC plan participants did not change their asset allocations, even as stock values generally declined during the first six months of the year. In the first half of 2022, 6.6% of DC plan participants changed the asset allocation of their account balances, slightly lower than 7.3% in the first half of 2021, 8.3% in the first half of 2020, and 7.7% in the first half of 2009.
ICI’s study tracks contributions, withdrawals, and other activity in 401k and other DC plans, based on recordkeeper data covering more than 40 million employer-based DC retirement plan participant accounts at the end of June 2022. ICI reports that DC plan assets represent more than one-quarter (27%) of the total retirement market and about one-tenth of U.S. households’ aggregate financial assets at the end of the second quarter of 2022.
ICI has been tracking DC plan participant activity through recordkeeper surveys since 2008.
Other key findings include:
- DC plan withdrawal activity in the first half of 2022 remained low and was similar to the activity observed in the first half of 2021. In the first half of 2022, 2.9% of DC plan participants took withdrawals, compared with 2.8% in the first half of 2021, 2.8% in the first half of 2020 (as the COVID-19 pandemic hit the U.S.), 2.5% in 2019, and 1.8% in the first half of 2009 (another time of financial market stress). Levels of hardship withdrawal activity edged up slightly in the first half of 2022, although still remained low. Only 1.6% of DC plan participants took hardship withdrawals in the first half of 2022, compared with 1.1% in the first half of 2021.
- The recordkeeper data indicate that DC plan participants remain committed to saving and investing. Only 1.6% of DC plan participants stopped contributing in the first half 2022, compared with 1.1% in the first half of 2021, 2.0% in the first half of 2020, and 4.6% in the first half of 2009.
- DC plan participants’ loan activity remained the same in the second quarter of 2022. At the end of June 2022, 12.5% of DC plan participants had loans outstanding, compared with 12.5% at the end of March 2022, 12.5% at year-end 2021, and 14.8% at year-end 2020. It is possible that the availability of coronavirus-related distributions (CRDs) in 2020 has resulted in reduced loan activity. Additionally, a DC plan participant is no longer required by law to first take a plan loan (in plans with a loan option) prior to taking a hardship withdrawal, though some plans may retain this requirement.
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