Participants in 401(k)s and other defined contribution (DC) plans controlled $7.7 trillion at the end of 2017, according to updated data from the Investment Company Institute (ICI). That represented more than a quarter (27 percent) of all the retirement assets in the United States last year and equated to roughly one-tenth of Americans’ aggregate financial assets. More importantly, 2017’s yearend total was a new record for defined contribution plan assets, which highlights the significant rebound from $3.5 trillion in 2008 that consistent participants in these plans have been able to enjoy. The ICI report also revealed that only 2.7 percent of account owners stopped making contributions to their 401(k)s and other DC plans last year, a full percentage point below what was seen during the “Great Recession.”
Further, hardship withdrawals were taken by just 1.7 percent of DC plan participants in 2017, and only 3.4 percent of account owners took any sort of withdrawal whatsoever last year. As for borrowing activity, 16.7 percent of all 401(k) plan participants had a related loan outstanding at the end of the fourth quarter of 2017, the lowest Q4 reading since 2009. With loan demand trending down since 2011, it seems likely that the tightening labor market and slight uptick in wage growth have helped lessen the need for many Americans to tap into their retirement assets early. Sadly, researchers at the U.S. Census Bureau estimated that even though around eight in ten adults work for companies that sponsor a 401(k) or similar tax-deferred retirement plan, just 41 percent of employees actually take advantage of these savings vehicles. Participation figures could improve going forward, though, if more employers incorporate automatic enrollment, auto-escalation, and other plan design elements intended to help make sure workers are getting the most out of their available benefits.
Sources: Investment Company Institute, Bloomberg, U.S. Census BureauPost author: Charles Couch