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.
While automatic enrollment gets participants into plans, a sizable segment are starting their average contributions at a minimum 3.3% rate and failing to take any additional action to increase that, according to J.P. Morgan Asset Management.
Only 2.4% discontinued contributions, a mere 2.8% took withdrawals and just 1.3% took hardship withdrawals, ICI data show
The younger the investor, the more likely they are to have their money invested in equities, while older investors are more likely to gravitate to fixed-income securities, according to the ICI.
The impact is greater for younger investors, as they have a long time horizon for saving, MassMutual finds.