Retirement savers stuck with their asset allocations during the first quarter despite significant market volatility, according to a new study by the fund trade group the Investment Company Institute (ICI).

Defined contribution (DC) plan participants continued to save in their retirement plans at work and were undeterred by market declines,  according to ICI's quarterly report on plan participant activity. The study was based on data tracking 35 million plan participants.
 
“Even as stock values declined at the start of 2022, DC plan participants generally stayed the course and refrained from changing asset allocations,” Sarah Holden, ICI senior director of retirement and investor research, said in a statement. “Furthermore, the data suggest that through the first quarter of 2022, retirement savers continued contributing to DC plans.”
 
Only 0.9% of DC plan participants stopped contributing during the first quarter of 2022, compared with 0.8% in the first quarter of 2021, 1.4% in the first quarter of 2020, and 2.7% in the first quarter of 2009, according to the study.

“The recordkeeper data indicate that DC plan participants remain committed to saving and investing,” ICI said.

Investors' resolve also showing itself in DC plan withdrawal activity, the study said.

Withdrawals remained low in the first quarter of 2022 and were slightly lower than withdrawal activity recorded in the first quarter of 2021, ICI found.

Only 1.8%% of DC plan participants took withdrawals in the first quarter of 2022, compared with 2.2% in the first quarter of 2021, 1.8% in the first quarter of 2020, 1.4% in the first quarter of 2019. By comparison, the percentage was 2.7% in the first quarter of 2009, when the financial crisis triggered a stock market meltdown.
 
DC plan participants are staying the course in terms of their asset allocations, even as stock prices declined during the first three months of the year, according to the study. 

In the first quarter of 2022, 4.7% of DC plan participants changed the asset allocation of their account balances, slightly lower than the 5.5% who changed allocations in the first quarter of 2021. It was also lower than the 6.2% in the first quarter of 2020, and 5.5% in the first quarter of 2009.

In the first quarter of 2022, 3.0% changed the asset allocation of their contributions, down from 3.9% in the first quarter of 2020, 4.1% in the first quarter of 2020, and much lower than the 7.3% of investors who changed the asset allocations of their contributions in the first quarter of 2009.

Hardship withdrawal activity also remained low through the first quarter of the year, ICI said. 

Only 0.9% of DC plan participants took hardship withdrawals in the first quarter of 2022, compared with 0.6% in the first quarter of 2021, 0.8% in the first quarter of 2020, 0.5% in the first quarter of 2019, and 1.2% in the first quarter of 2009.

“Withdrawal activity likely reflects the impact of ongoing financial stresses relating to the Covid-19 pandemic, although the penalty relief and increased flexibility in plan withdrawals under the [CARES Act] were available only during 2020,” ICI said.

DC plan participants’ loan activity has actually declined since 2020, when the pandemic was in full swing. At the end of March, 12.5% of DC plan participants had loans outstanding, compared with 12.5% at year-end 2021 and 14.8% at the close of 2020.

“It is possible that the availability of coronavirus-related distributions in 2020 has resulted in reduced loan activity. Additionally, a DC plan participant is no longer required by law to first take a plan loan (in plans with a loan option) prior to taking a hardship withdrawal, though some plans may retain this requirement,” ICI said.