Twenty-five percent of Americans with 401(k) retirement accounts closed out 2022 by setting aside just 3% or less of their salaries in those accounts, according to the results of a study by Bank of America. Across all age groups, the average retirement contribution rate was 6.4%, down from 6.6% in December 2021.
According to Bank of America data, the cohort with the highest percentage of participants contributing 3% or less of their salaries (43%) was the Baby Boom generation, those born between 1946 and 1964. The millennial generation, those born between 1981 and 1996, had the highest percentage (47%) of individuals contributing 7% or more of their salaries.
The portion of 401(k) plan participants who made hardship withdrawals in the fourth quarter dropped to 0.4% from 0.5% in the third quarter, Bank of America found. When people did make hardship withdrawals, the average amount taken in the last quarter was $4,700, down 8% from the third quarter.
Total loans from 401(k) plans increased slightly in the fourth quarter to 15.9% from 15.7% in the third quarter and collectively totaled more than $450 million, according to Bank of America. Generation X, born between 1965 and 1995, had more participants (3.1%) with loans in default at year end compared with other generations.
The findings track with McKnight’s previous reporting that many American workers could be woefully short of the funds needed to pay for senior living, skilled nursing facility or home care. In a recent PayingforSeniorCare.com / Pollfish survey, almost 19% of respondents said that they were concerned that inflation will not allow them to continue to afford senior living or home care. Other surveys have yielded similar results.
