T. ROWE PRICE: AUTO-SOLUTIONS CONTINUED TO POSITIVELY INFLUENCE 401(k) SAVINGS BEHAVIOR IN 2022, EVEN AMID MARKET UNCERTAINTIES
2022 report featuring latest trends in 401(k) plan design and participant behavior
Auto-solutions, including auto-enrollment and auto-increase, continue to encourage participation and savings rates and drive better outcomes for savers. The report found that plan adoption of auto-enrollment rose in 2022 to 85%, continuing an eight-year trend. Overall participant-weighted participation rates fell from 68% in 2021 to 66% in 2022. Despite this decline, auto-enrollment continued to yield far higher participation rates: 86% in 2022, compared with just 37% for plans without auto-enrollment. Adoption of the auto-increase solution also increased in 2022 to 49%, up slightly from 48% in 2021. Additionally, since 2017, when the 6% default rate outpaced the 3% standard, more plans have continued the trend to introduce higher default rates, driving higher contribution rates.
Additional key findings include:
- Average account balances did not escape the market volatility in 2022. The average dropped from
$124Kin 2021 to $101Kin 2022—a decrease of 18%, compared with the 20% drop experienced by the S&P 500 Index. This was the second largest decline in the past 15 years, with the first being the 27% drop from 2007 to 2008 during the Great Financial Crisis. Account balances for participants age 70+ decreased by an average 8%, most likely because these participants allocate more to money market/stable value and less in stocks, which suffered the greatest losses in 2022.
- After climbing steadily since 2015, the average combined employee deferral rate remained relatively flat in 2022, down just slightly from 8.5% in 2021 to 8.4% in 2022.
- Allocations to target date investments experienced modest gains for the third year in a row. The vast majority of retirement plans (97%) now offer target date investments, and 44% of overall assets are invested in a target date investment.
- Plan adoption of Roth contributions increased from 83% in 2021 to 87% in 2022. As of the end of 2022, 13.2% of participants were making Roth deferrals, up from 4.7% a decade prior, pointing to the increasing popularity of this option.
- Despite the effect of market volatility on account balances and rising inflation, participants are resisting the temptation to tap into their retirement savings for pressing financial needs: loan usage remained below the pre-pandemic average: 18.3% of participants had a loan in 2022, compared with 18.5% in 2021 and 22.1% in 2019. In general, loan usage has been declining for the past 10 years.
- While hardship withdrawal usage returned to pre-pandemic levels in 2022: 1.3% compared with 0.8% in 2020 and 0.9% in 2021, the average amount decreased from the 10-year high in 2021, dropping from
"With market volatility caused by war, significant inflation, and fears of a recession, the challenges in 2022 were enough to unsettle even the most prepared retirement savers," said
Founded in 1937,
View original content:https://www.prnewswire.com/news-releases/t-rowe-price-auto-solutions-continued-to-positively-influence-401k-savings-behavior-in-2022-even-amid-market-uncertainties-301805594.html
Monique Bosco, 410-345-5740, Monique.Bosco@troweprice.com; Daniel Morris, 443-804-8595, Daniel.Morris@troweprice.com; Laura Parsons, 443-472-2281, Laura.Parsons@troweprice.com