Most Retirement Savers Held Fast in Q1: ICI
A cross section of record-keeping data showed a large majority didn't change their participation in plans.
Despite the falling stock market, investors — at least those in defined contribution plans — have stayed put through the first quarter this year. Only 1.8% of those in DC plans took any withdrawals, the same as in Q1 2020, and lower than the 2.2% in 2021. But this is slightly higher than pre-pandemic levels in 2019 of 1.4%, according to an Investment Company Institute report.
The ICI noted that 28% of retirement savings are in 401(k) plans. The record-keeping data it studied represents about 35 million DC plan investors.
The study also found that the share of investors who took a hardship withdrawal was at its highest since 2019: 0.9% in the quarter, up from 0.6% in in the year-ago quarter, 0.8% in Q1 2020 and 0.5% in Q1 2019.
Another option for participants was to stop contributing to a DC plan, which 0.9% did in the first quarter, versus 0.8% in 2021 and 1.4% in 2020. It was on par with 2019, in which 0.9% stopped contributing.
The numbers did not include coronavirus-related distributions.
There was also a slowing of changing asset allocations, the DC record-keeping data found. While 4.7% of investors in DC plans changed asset allocations in Q1 2022, this is down from 5.5% in Q1 2020 and 6.2% in Q1 2021. It is up, however, from 2019, in which 4.2% changed asset allocations.
Also, fewer investors were changing their DC plan contribution rates, according to the ICI study. In Q1 2022, 3.0% changed the rate, whereas that number 4.1% did so in Q1 2020 and 3.9% did in Q1 2021. This is up slightly from 2.9% in 2019.
As a comparison, all these values were below 2009 levels, especially with DC plan contribution level changes, in which 7.3% of DC plan investors made changes back then.
“Even as stock values declined at the start of 2022, DC plan participants generally stayed the course and refrained from changing asset allocations,” said Sarah Holden, ICI senior director of retirement and investor research, in a statement. “Furthermore, the data suggest that through the first quarter of 2022, retirement savers continued contributing to DC plans.”