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What Are 401(k) Participants Doing?

What did 401(k) participants do in the first half of 2016 that they didn’t do in 2015?

Not much, according to “Defined Contribution Plan Participants’ Activities, First Half 2016,” the Investment Company Institute’s (ICI) latest study of retirement plan savers’ actions. The study, based on DC plan record keeper data covering about 28 million participant accounts in employer-based DC plans, found that loans, withdrawal, contribution and rebalancing activity was very much in keeping with historic norms.

The survey — which noted that DC plans now comprise about 29% of U.S. retirement assets (about $7 trillion) — found that:

  • Only 1.8% of DC plan participants stopped contributing in the first half of 2016, the same share as in 2015 — and the ICI notes that it is possible that some of these participants stopped contributing simply because they reached the annual contribution limit.

  • Withdrawal activity for DC plans remained low in the first half of 2016, as in the first six months of 2015, with hardship just 0.8% of DC plan participants taking hardship withdrawals during the first half of 2016, compared with 0.9% in the first half of 2015.

  • Just 6.5% of DC plan participants changed the asset allocation of their account balances, and 5.5% changed the asset allocation of their contributions. Account balance reallocation activity was little changed and contribution reallocation activity was slightly lower compared with the same time frame a year earlier.

  • At the end of June 2016, 17.1% of DC plan participants had loans outstanding, compared with 17.0% at the end of March 2016.

ICI notes that two factors seem to be influencing DC plan participants’ loan activity: reaction to financial stresses and a seasonal pattern. Probably responding to financial stresses, the percentage of DC plan participants with loans outstanding rose from the end of 2008 (15.3%) through 2011 (18.5%). The ICI notes that the first quarter of the year tends to have lower percentages of DC plan participants with loans outstanding compared with later quarters.