Despite the reported dip in retirement confidence, a just-released Bank of America report found average participant savings rate are up so far in 2023.
The report is the latest in Bank of America’s 401(k) Participant Pulse series, which aims to increase participant confidence in retirement planning and financial wellness.
According to the findings, while participants ended the quarter with lower balances year-over-year at $78,800 and down from $86,000 in March 2022, the average savings rate went up slightly to 6.5% for Q1. This resulted in an average contribution amount in March of $820, a 24% bump from $660 in March 2022, found Bank of America.
More participants increased their plan contribution rates (14.2%) than decreased (3.2%) across all generations, especially among Gen Z (23% vs. 2.4%) and Millennial (15.7% vs. 3.6%) participants.
Kevin Crain, head of retirement research and insights at Bank of America, said the findings may point to a shift in financial behavior and thinking among participants, despite current market swings. “An increase in 401(k) savings, coupled with only moderate activity in participants accessing savings, such as loans and withdrawals, continues to show that even in the current economy, participants are generally staying the course when it comes to longer term savings,” Crain said. “This could also indicate improving confidence among participants and their financial well-being.”
When it came to loans, the percentage of participants borrowing from their plan declined to 1.9% in Q1, from 2.1% in Q4 2022. However, the average loan per participant increased to $8,550, up 14% from Q4 2022 and down 4% from Q1 2022, reported Bank of America.
In Q1, 14.3% of participants had a loan in default, a considerable drop from 15.2% in Q4 2022, with loans totaling to $460 million by the end of the quarter. Across all age groups, Gen X and Millennials had the highest percentage of outstanding loans, at 22.4% and 13.8%, respectively.
Bank of America also reported a rise in participants taking hardship distributions at 0.46%, up from 0.4% in Q1 2022, and the number of participants increased 15% from Q4 2022, up 33% from Q1 2022. The average hardship distribution amount was $5,100, an increase of 8.5% compared to Q4 2022 and down from $6,000 in Q1 2022.
SEE ALSO:
- BoA ‘401(k) Participant Pulse’ Report to Track Participant Confidence
- Workers and Retirees Report First Dip in Retirement Confidence Since 2008 Recession: EBRI
- Americans Say They Won’t Have Enough Savings for Retirement
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.
