Workers in their business plans continued to save for retirement last year, according to a study released Tuesday, with only a fraction making withdrawals despite the ongoing coronavirus pandemic.
The Investment Company Institute found that 4.1% of defined contribution plan participants made withdrawals in 2021, up slightly from 3.8% in 2020 and 3.9% in 2019. The withdrawal rates of the pandemic years were also higher than the 3.1% rate recorded in 2009 during the financial crisis, another year of financial hardship, the organization used as a comparison.
Plan participants stayed on track, contributing over the past year in much the same way they did in 2020 and in the heart of the financial crisis, with 2.2% contributing in 2021, 2.3% in 2020 and 3, 4% discontinued in 2009 Report, Activities of participants in defined contribution plan, 2021.
“Despite the many challenges posed by the ongoing pandemic over the past year, the data suggests that savers in retirement have generally been working to preserve their nest egg,” said Sarah Holden, senior director of retirement and investor Research at ICI, in a statement. “This data shows that DC plan savers generally continued to contribute and refused to make withdrawals.”
The ICI report was based on record data for defined contribution plans covering more than 35 million subscriber accounts as of December 2021. The ICI, a trade association representing the mutual fund industry, has monitored plan participant activity since 2008.
The report was released as pension security has become an issue, with bipartisan momentum in Congress. The House of Representatives recently overwhelmingly passed legislation that would expand workplace austerity programs and help workers put more money aside for retirement.
The ICI report showed that 2.1% of plan participants claimed hardship benefits in 2021, up from 1.4% in 2020, 1.9% in 2019 and 1.6% in 2009.
“Withdrawal activity likely reflects the impact of the ongoing financial strains related to the COVID-19 pandemic, although the penalty relief and increased flexibility in plan withdrawals lag behind [2020 legislation] are no longer available in 2021,” the ICI report says. “In 2020, the records identified 5.8 percent of DC plan participants who received coronavirus-related distributions.”
The ICI report also showed that 9.1% of plan participants changed the asset allocation of their account balances in the past year, while 5.3% changed the asset allocation of their contributions.
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