There’s some good news on the retirement front, as Bank of America reported in its quarterly Participant Pulse that many of the key plan indicators it tracks were trending in a positive direction.
Among other things, the report reveals that the average 401(k) account balance as of the end of March 2024 was approximately $92,000, up 17% compared to $79,000 at the same time last year.
In addition, the average first-quarter contribution rate of 6.6% is up slightly from 6.5% at year-end 2023. And approximately 15% of 401(k) plan participants increased their contribution rate, while just 3.5% decreased their rate.
The report provides insights into how short-term economic trends are impacting retirement planning, including participants’ 401(k) and health savings account (HSA) contribution rates, average loans, and overall retirement planning based on the behaviors of more than 4 million participants in accounts administered by Bank of America.
Loans and Hardship Distributions
Compared to last quarter, fewer participants took a loan, while slightly more took a hardship distribution from their retirement plan. One downside was that when money was withdrawn, both average loan and hardship distribution amounts were larger than last quarter.
According to the firm’s data, 2% of 401(k) participants borrowed from their plans in the first quarter, down slightly from 2.3% in the fourth quarter of 2023. Notably, this is lower than the past three quarters and comparable to the first quarter of 2023, which came in a 1.9%.
In contrast, the average loan per participant in the first quarter was approximately $9,100, up from $8,600 in the first quarter of 2023.
On a positive note, the number of participants with a loan in default has steadily declined over the last several quarters, the report further observes. In this case, the data shows that 12.3% of participants had a loan in default as of the first quarter, which is down from 12.6% in the fourth quarter and a hefty drop from 14.3% in the first quarter of 2023.
Regarding hardship distributions, less than 1% (0.61%) of participants took a hardship distribution in the first quarter, which was up slightly from the 0.57% of participants who did so in the fourth quarter. The average hardship distribution also rose slightly from $4,366 in the fourth quarter to $5,030 in the first.
HSA Holders Saving More
HSA holders, meanwhile, are saving more of their contributions; that said, few are investing for future growth, the report shows.
In the first quarter, nearly 4 in 10 account holders (39%) saved more of their contributions, compared to less than a quarter (24%) who did so in the fourth quarter of 2023. Among Millennials, those who saved more of their HSA contributions jumped to 47% in the first quarter—the most of any generation—up from 34% in the fourth quarter of 2023.
As to those who are investing their HSA balances, the data shows a slight uptick to 13% of account holders, from 12% in the fourth quarter. More men (18%) than women (12%) are investing their balances, as are Baby Boomers (16%) compared to other generations.
“This data overall seems to indicate that Americans are prioritizing long-term savings more in 2024: with 401(k) account balances up about 17% compared to last year, 15% of participants increasing their 401(k) contribution rates, and HSA account holders saving more of their contributions,” Lisa Margeson, Managing Director of Workplace Benefits Retirement Research at Bank of America, told NAPA Net.
Financial Wellness
Finally, Bank of America’s Participant Pulse shows that financial wellness scores are holding relatively steady over the last six months, but the firm notes that they are still seeing a gender gap.
While the average financial wellness score came in at 51 on a 100-point scale, men registered at 54, while women were at 47. The highest portion of men scored in the 71-80 range, while the highest portion of women scored in the 51-60 range. Meanwhile, the average financial wellness score for lower-income participants (household income of less than $40,000) came in at 42.
The firm’s financial wellness tracker calculates a score based on an employee’s answers to the assessment, and is a snapshot of the employee’s current financial situation as it relates to six key behaviors: (1) management of expenses; (2) management of credit card debt; (3) plans for the unexpected; (4) preparedness for retirement and other identified goals; (5) management of long-term debt; and (6) preparedness for preservation of assets
Access to the report can be found here.
