Bank of America Reports 15% Increase in 401(k)s in 2023
The increase came partly from increased contributions, partly from market gains, which was also noted in separate 401(k) investing research from Alight.
Bank of America’s full year participant research found that 401(k) account balances rose 15% to an average of $86,280 in 2023 due to a combination of higher contributions and favorable markets, the firm reported Wednesday.
Bank of America’s Retirement and Personal Wealth Solutions, along with its Bank of America Institute, track the behavior of plan participants in the bank’s recordkeeping system, which consisted of more than 4 million people as of December 31, 2023.Among that group, almost 18% of 401(k) plan participants boosted their contribution rates in the fourth quarter of 2023, up from slightly more than 9% in the third quarter , a sign that people are focusing on their long-term savings, according to a statement from Lorna Sabbia, the bank’s head of retirement and personal wealth solutions.
“We were encouraged to see more plan participants taking positive actions in their accounts in the fourth quarter,” Sabbia said. “These insights offer signs that people are prioritizing their retirement savings, with more employees increasing their contribution rates and fewer taking hardship distributions.”
The researchers also found that fewer participants borrowed from their 401(k) plan in Q4, with 2.3% taking loans, as opposed to 2.5% in Q3. The average loan per participant fell to $8,210 in Q4 from an average of $8,530 in Q3.
A separate report on trading within 401(k) plans showed a similar sense of positivity for market performance. According to Alight Solutions’ 401(k) Index observations, released in January, trading was light in 2023, “with only 14 above-normal days, down significantly from 41 days in 2022,” according to the recordkeeper.
The firm noted that net trading activity was down as well, to 0.82% in 2023 from 1.27% in 2022.“With rising markets in 2023, 401(k) investors were content to watch their balances increase and not make large trades,” Alight wrote in its report, which tracks trading among more than 2 million people in its participant pool.
Most retirement plan contributions in 2023 went to target-date funds and large-cap U.S. equity funds, according to Alight. Equity gains saw the average investor end 2023 with 70.5% of their portfolio in stocks, compared to 68.2% at the beginning of the year.
Bank of America also noted in its report an uptick in health savings account balances in 2023, again in part from contributions and in part from favorable market conditions.
The Charlotte, North Carolina-based firm reported an 11% increase in HSA account balances over the prior year 2022. The average account balance increased to $4,380 at year-end 2023, up from $39,30 at year-end 2022. Almost four out of 10 account holders contributed more than they withdrew, the bank reported.