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401(k) Savings Are Up, But So Are Retirement Loan Amounts

A business person putting coins into a piggy bank, indicating retirement savings

On the retirement savings front, there’s good news and there’s bad news.

The good: Employees have started off strong in the first quarter of the year, with higher retirement account balances and higher contribution rates.

The average 401(k) balance at the end of March was approximately $92,000, up nearly 17% compared to $79,000 at the same time last year, according to Bank of America’s (BoA’s) Q1 2024 Participant Pulse data.

The average Q1 contribution rate was 6.6%, up slightly from 6.5% at the end of 2023. In Q1, one in five 401(k) plan participants changed their contribution rate, with roughly 15% increasing their contribution rate and 3.6% decreasing it.

The bad: Driven by continued financial stress and the high cost of living, some participants continue to take money out of their accounts, and those who do are taking out more than before. Although just 2% of participants borrowed from their workplace plan in the first quarter—down from 2.3% in the final quarter of 2023—the average loan per participant was $9,140, up more than 10% from Q4 2023, when the average loan was $8,207.

Meanwhile, the percentage of participants taking a hardship distribution ticked up in the first quarter to 0.61%, up from 0.57% in Q4 2023 and up from 0.46% a year earlier in Q1 2023, according to BoA. The average participant hardship distribution amount in Q1 was $5,030, up from $4,366 in Q4 2023.

Lisa Margeson, managing director of retirement research and insights at Bank of America, said the data indicates there are some residual effects of sky-high inflation.

“Economic signs are positive on the whole, but some consumers may still feel the effects of recent years, which is likely reflected in the increase in loan amounts,” she said.

The BoA report comes on the heels of a report from the Employee Benefit Research Institute (EBRI) and Greenwald Research that found that employee and retiree confidence about retirement has edged up slightly since a historic drop last year, but overall confidence is still near record low numbers. People’s confidence in having enough money to live comfortably throughout retirement improved slightly to 68% of workers, up from 64% in 2023, and 74% of retirees, up from 73%.

Much of the continued low confidence is a result of inflation’s impact, which “remains a concern among workers and retirees,” said Lisa Greenwald, CEO of Greenwald Research.

But the BoA report offers evidence of a rebound, Margeson said.

“Overall, the data indicates an upward trajectory of Americans reprioritizing long-term savings for retirement, which is an encouraging shift in consumer action and perspective,” she said.

BoA also found that employees are saving more in their health savings accounts (HSAs). In Q1, account holders saved 39% of their contributions, up from 24% in Q4 2023. Millennials saved more than any other generation at 47% of contributions, up significantly from 34% in Q4 2023.

All in all, the BoA data “shows that employees are leveraging their workplace retirement plans as they begin to refocus their attention on their long-term savings,” Margeson said.

Employers, she said, should reinforce positive financial wellness habits by “communicating with employees about the benefits of their retirement plans—including taking full advantage of any employer match, and as they can, maximizing their 401(k) contributions, as well as saving for future health care expenses through an HSA, and leveraging that account’s investment feature.”


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