Bank of America released its Q2 2023 “Participant Pulse” report, which found that average 401(k) balances increased by $7,250 (9.6%) from the end of 2022.
The report also found that a growing number of 401(k) participants are initiating withdrawals from their plans: “The number of participants taking hardship distributions increased 36% year-over-year, after the increases in the first quarter of this year. Additionally, the percentage of participants who borrowed from their workplace plan in Q2 also increased (2.5%, vs. 1.9% in Q1).”
“Participant Pulse” monitors the behavior of individuals in the employee benefit programs of Bank of America’s record-keeping clients, which consists of more than 4 million participants as of June 30, 2023.
“The data in our report tells two stories: one of balance growth, the optimism of younger employees and the maintenance of contributions, in contrast to a trend of higher plan withdrawalssaid Lorna Sabbia, head of personal wealth and retirement solutions at Bank of America. “This year, it’s understandable that more employees are prioritizing short-term spending over long-term savings. However, it is critical that employees continue to invest in life’s biggest expense: retirement.”
And despite rising 401(k) withdrawals, employee contributions held steady, with a average rate that remained at 6.5% during the first half of 2023. According to BofA, more participants increased their rate than decreased it (10.2% vs. 2.2%) in the second quarter, which was led by Gen Z and Millennial employees (19.3% vs. 2.6% and 11% vs. 2.6 %, respectively).
Among the relevant data of the study, it is noted that:
· The Health Savings Account (HSA) balances increased by 11.9% relative to 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, based on 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 the way at 15%. In addition, more men invested than women (18% vs. 11%).
· Feelings of financial well-being decreased slightly. Out of 100 possible points, the average financial well-being score for employees It was 56, one point less than the 57 at the end of the yearwith women behind men (52 vs. 59).
For more information on the full report and its methodology, enter here.
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