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Whether it's post-pandemic-related or worries about the economy, Americans are saving for retirement. A study from the Investment Company Institute – Defined Contribution Plan Participants' Activities, 2022 – shows that only 2.5% of defined contribution (DC) plan participants stopped contributing to their plans last year, indicating disciplined savings habits through stretches of historic market volatility.
Compared with 2021 data, the percentage of DC plan participants withdrawing account funds held steady at 4.1%, suggesting that Americans are committed to preserving their retirement nest eggs even during challenging times.
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Levels of hardship withdrawal activity edged up a bit in 2022, though still low in absolute terms. In 2022, 2% of DC plan participants took hardship withdrawals, compared with 1.7% of DC plan participants in 2021, 1.4% in 2020, 1.9% in 2019, and 1.6% in 2009. DC plan participants likely continue to feel the impact of ongoing financial stresses relating to the COVID-19 pandemic, although the penalty relief and increased flexibility in plan withdrawals under the Coronavirus Aid, Relief, and Economic Security (CARES) Act (enacted March 27, 2020) are no longer available in 2021 or 2022.
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In terms of asset allocation, the report, and its author, Senior Director of Retirement and Investor Research, Sarah Holden state: "Most DC plan participants stayed the course with their asset allocations as stock values generally fell during the year. In 2022, 8.0% of DC plan participants changed the asset allocation of their account balances, slightly lower than 9.1% in 2021, 10.6% in 2020, 8.3% in 2019, and 11.8% in 2009. Even fewer DC plan participants changed the asset allocation of their contributions. In 2022, 4.0% changed the asset allocation of their contributions, a bit lower than in recent years, and much lower than 10.5% in 2009."
Another symptom of the economy was DC plan loan activity, which edged up slightly at the end of December 2022 and continues to be close to its historically low level. At the end of December 2022, 13.3% of DC plan participants had loans outstanding, compared with 13.0% at the end of September 2022, and 12.5% at the end of June 2022, March 2022, and December 2021.
Overall saving from every paycheck made roughly eight out of 10 DC-owning individuals less worried about the short-term performance of their investments and 79% of DC or IRA owners indicated confidence in the ability of the 401(k) system to help individuals meet their retirement goals.
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