Despite the uncertainty wrought by the coronavirus pandemic, Americans are continuing to save for retirement through defined contribution pension plans, according to new data from the Investment Company Institute.
The institute tracks contributions, withdrawals and other activities based on DC plan record-keeper data covering more than 30 million participant accounts in employer-based plans on a quarterly basis.
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The data for the first quarter of 2021 found DC plan participants remained committed to saving, with preliminary estimates indicating only 0.8 per cent of participants stopped contributing to their plans during the first three months of this year, compared with 1.4 per cent during the same time period last year. This is substantially lower than the 2.7 per cent of DC plan members who stopped contributing to their plans in the first quarter of 2009 on the heels of the 2008 global economic crash.
As stock values edged up during the first three months of 2021, 5.5 per cent of DC plan participants changed their asset allocations, slightly lower than the activity observed in the first quarter of 2020 (6.2 per cent). Meanwhile, 3.9 per cent changed the asset allocations in the first quarter of this year, in line with the activity observed in the first quarter of 2020 (4.1 per cent) and significantly lower than 7.3 per cent in the first quarter of 2009.
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In the first quarter of 2021, 2.2 per cent of DC plan participants took withdrawals, compared with 1.8 per cent in the first quarter of 2020 and 2.7 per cent during the same time period in 2009. Levels of hardship withdrawal activity also remained low, with only 0.6 per cent of DC plan participants taking withdrawals for this reason during the first quarter of 2021, compared with 0.8 per cent in the first quarter of 2020 and 1.2 per cent in the first quarter of 2009. At the end of this past March, 14.3 per cent of DC plan participants had loans outstanding, compared with 14.8 per cent at year-end 2020 and 16.3 per cent at the end of March 2020.
“Retirement savers are committed to saving for their futures even during challenging times,” said Sarah Holden, senior director of retirement and investor research at the institute, in a press release. “These data highlight that paycheque-by-paycheque saving and investing through DC plans provide discipline to help participants stay the course for their long-term goals.”
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