In stark contrast to current craziness, relatively mild market conditions last year meant 401k and participants in similar defined contribution plans generally kept contributing to their retirement savings, at least during the first three quarters of 2019.
The Investment Company Institute’s appropriately titled Defined Contribution Plan Participants’ Activities, First Three Quarters of 2019 tracks contributions, withdrawals, and other activity, based on DC plan recordkeeper data covering more than 30 million participant accounts in employer-based DC plans.
The latest recordkeeper data indicate that savers remain committed to saving for their futures by continuing to contribute to their DC plans. Almost all plan participants continued contributing to their plans, with only 1.9% of DC plan participants stopping their contributions in the first three quarters of 2019.
Withdrawal activity
Withdrawal activity for DC plans remained low in the first three quarters of 2019, although slightly higher than the activity in the first three quarters of 2018. In the first three quarters of 2019, 3.3% of DC plan participants took withdrawals, compared with 2.9% in the first three quarters of 2018.
Levels of hardship withdrawal activity also were low, with only 1.6% of DC plan participants taking hardship withdrawals during the first three quarters of 2019, compared with 1.4% in the first three quarters of 2018.
Asset allocation
Most DC plan participants stayed the course in their asset allocations, as stock values rose during the first nine months of the year. In the first three quarters of 2019, 7.1% of DC plan participants changed the asset allocation of their account balances, and 4.2% changed the asset allocation of their contributions. Account balance reallocation activity was slightly lower than the activity observed in the same time frame a year earlier and contribution reallocation activity was little changed.
Loan activity
DC plan participants’ loan activity at the end of September 2019 was similar to a year earlier. At the end of September 2019, 16.3% of DC plan participants had loans outstanding, compared with 16.4% at the end of September 2018.