Defined contribution participants held steady in actions that would adversely affect account balances in the first half of 2013, according to a report published Tuesday by the Investment Company Institute.
Only 1.5% of participants stopped contributions during the first half of 2013 compared to 1.6% during the first half of 2012, according to the report. “It is possible that some of these participants stopped contributing simply because they had reached the annual contribution limit,” said the report, adding that the percentage of participants stopping contributions was “negligible” compared to participants continuing to invest in their DC plans.
The report said 0.9% took hardship withdrawals during the first six months of 2013, the same percentage as the first half of 2012. And 2.1% took any withdrawal for the first half of 2013, the same percentage for the first six months of 2012.
“The data suggest that participants appreciate the ease of saving paycheck by paycheck through payroll deduction and that the discipline of 401(k) plan investing keeps them on track,” Sarah Holden, ICI's senior director of retirement and investor research, said in an e-mail.
The report also said 18.1% of participants in 401(k) plans had outstanding loans as of the second quarter of 2013 vs. 17.9% in the first quarter and 18.2% by year-end 2012.
“Just as we observed in the wake of the bear market and recession in the early 2000s, loan activity has edged up in the wake of financial stresses of 2008 to 2009,” Ms. Holden wrote. “While some participants find the need to reach for that financial safety valve, it is still the case that fewer than one in five DC plan participants has loans outstanding.”
ICI reported that total U.S. retirement assets reached $20.9 trillion by June 30, up from $20.7 trillion as of March 31. All defined contribution plans accounted for $5.3 trillion of the total, up from $5.2 trillion as of March 31.
The ICI report is based on information from DC record keepers for plans with about 24 million participants.