Participants who have taken a hardship withdrawal are nearly three-times more likely to feel “always” stressed in general and three-times more likely to have “a lot” of stress about their financial situation.
The IRS is aiming to simplify the hardship withdrawal process, but plan sponsor clients still have to remain mindful of their compliance obligations and safe harbor requirements.
The Bipartisan Budget Act of 2018 made it easier for retirement plan participants to access hardship withdrawals without taking loans first; since passage of the law, hardships withdrawals are up 40% in Fidelity’s book of business.
And the use of 401(k) loans fell to a nine-year low of 22.5% in 2018, according to T. Rowe Price’s annual participant data benchmarking report.
In the first three quarters of 2018, only 2.2% of participant stopped contributing to their plans, ICI data shows.
Only 2.4% discontinued contributions, a mere 2.8% took withdrawals and just 1.3% took hardship withdrawals, ICI data show
Several provisions of the two-year budget bill affect retirement plans.
The impact is greater for younger investors, as they have a long time horizon for saving, MassMutual finds.
The number of participants taking hardship withdrawals remained less than 1%.