PROVIDENCE – Average 401(k) balances increased by 9.6%, or $7,250, since the end of 2022, according to the Q2 2023 Participant Pulse report released recently by Bank of America Corp.
The number of 401(k) participants initiating withdrawals from their plans also increased, according to the report, which found that the number of participants taking hardship distributions increased 36% year over year, following increases in the first quarter of 2023.
The percent of participants borrowing from their workplace plan in the second quarter increased 2.5%, compared with 1.9% in the first quarter of 2023.
The report monitors plan participants’ behavior in Bank of America recordkeeping clients’ employee benefits programs, which is comprised of more than 4 million participants as of June 30, 2023, according to a news release.
“The data from our report tells two stories – one of balance growth, optimism from younger employees and maintaining contributions, contrasted with a trend of increased plan withdrawals,” Lorna Sabbia, head of retirement and personal wealth solutions at Bank of America, said in a statement. “This year, more employees are understandably prioritizing short-term expenses over long-term saving. However, it’s critical that employees continue to invest in life’s biggest expense – retirement.”
The average employee contribution rate remained at 6.5% throughout the first half of 2023, according to the report, which found 10.2% of participants increased their contribution rate, compared with 2.2% that decreased their rate in the second quarter, which was led by Gen Z and millennial employees.
In addition to 401(k) trends, Bank of America expanded the report to also look at engagement across health saving accounts and overall feelings of financial wellness. Key findings include:
HSA account balances increased by 11.9% over year-end 2022. Average HSA account balances increased from $3,931 to $4,397 in the first six months of 2023.
Many HSA account holders continue to save their contributions for future expenses. Nearly 4 in 10 account holders contributed more than they withdrew in the second quarter, consistent with year-end 2022.
Baby boomers invested their HSAs at higher rates than other generations. On average, only 12% of account holders invested their HSAs for future growth in the second quarter, with baby boomers leading at 15%. In addition, more men invested than women (18% compared with 11%).
Feelings of financial wellness declined slightly. Out of a possible 100 points, the average financial wellness score for employees was 56, down one point from 57 at year-end, with women trailing men (52 compared with 59).
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Source: pbn.com
