Millennials Are the 401(k) Contribution Champs: BofA
The report found that 47% of millennials contributed at least 7% to their 401(k) plans last year.
Forty-seven percent of millennials contributed 7% or more to their 401(k) retirement plans last year, making them the generation most likely to save at high rates. At the same time, baby boomers were most likely to save 3% or less — 43% of them did so.
This is one of the insights in Bank of America’s new quarterly report series, 401(k) Participant Pulse, introduced Wednesday. The reports will provide insights into plan participants’ confidence and sentiment toward retirement planning and their overall financial wellness, according to a statement from the bank.
The inaugural report draws on data from BofA’s proprietary financial benefits programs, which include about 3 million 401(k) plan participants.
“We are deeply committed to understanding how current financial realities are affecting consumers’ long-term financial health and planning,” Lorna Sabbia, head of retirement and personal wealth solutions at BofA, said in the statement. “Long-term retirement planning is a critical metric when considering an individual’s financial wellbeing, as well as the economy as a whole.”
Other Report Findings
The average 401(k) plan participant contribution rate dropped from 6.6% at the end of 2021 to 6.4% at the end of 2022, which suggests consumers may have been somewhat more focused on short-term financial needs last year, the report said.
In the fourth quarter, 60,789 participants borrowed from their workplace plan, down by 12% from the previous quarter. Loan defaults rose slightly to 15.9%.
The average fourth-quarter loan amount was $7,500, the lowest average for all four quarters in 2022.
Participants in their 30s and 40s drove borrowing in 2022, according to the report. Those in the 30-to-49 age group took more than half of loans.
The number of participants who took a hardship distribution also declined in the fourth quarter, with the average dropping to 0.4% from 0.5% in the third quarter, and the total number of participants who did so falling by 18% to 12,350. The average hardship amount declined by 8% quarter over quarter.
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