The pandemic deterred very few investors from contributing to their 401(k)s or other defined contribution plans in 2021, according to the Investment Company Institute (ICI).
A new ICI study which tracks the contributions and withdrawals of 35 million plan participants, found that 97.8% of them continued to sock away money in 2021 as the Covid outbreak continued to roil the economy and job market for the second year in a row.
That participation rate is slightly up from the 97.7% of investors who stayed on track with contributions in 2020 and 96.6% who stayed the course in 2009—years also marked by financial stress, ICI reported.
“Despite the many challenges brought on by the lingering pandemic over the past year, the data suggest retirement savers generally worked to preserve their nest eggs,” Sarah Holden, ICI senior director of retirement and investor research, said in a release.
The data “indicate that DC plan savers generally continued making contributions and resisted taking withdrawals,” Holden added.
With total U.S. household financial assets valued at $118.2 trillion at the end of 2021, “DC plan assets are a significant component of Americans’ retirement assets, representing more than one-quarter of the total retirement market and about one-tenth of U.S. households’ aggregate financial,” ICI reported.
The number of plan participants who took withdrawals inched up slightly from 3.8% in 2020 to 4.1% in 2021. Hardship withdrawals also increased from 1.4% in 2020 to 2.1% last year, ICI found.
In contrast, participants loan activity “edged down” in 2021, ICI found. Some 12.5% of DC plan participants had loans outstanding at year-end 2021, compared with 14.8% at year-end 2020 and 16.1% at year-end 2019.
The percentage of participants who made asset allocation changes in their account balances was also down, from 10.6% in 2020 to 9.1% in 2021, ICI found. The percentage of participants who changed the asset allocation of their contributions also dipped to 5.3% from 6.3% in 2020, the fund trade group found.