People are dipping into their retirement savings to help
offset the economic impact of the COVID-19 pandemic, but so far those
withdrawals appear to be modest in size. A new Investment Company Institute
(ICI) research report — “Defined Contribution Plan Participants’ Activities,
First Half 2020” — showed that withdrawal activity from DC plans remained low
for the first half of 2020.
The report updates results from an ICI survey of a cross
section of recordkeeping firms that cover more than 30 million employer-based
DC retirement plan participant accounts. Per the findings, DC plan withdrawal
activity was only slightly higher in the first half of 2020 than it was during
the corresponding period in 2019.
The raw numbers illustrate just how minor that uptick was,
with 2.8% of DC plan participants taking withdrawals in 2020 and 2.5% doing the
same during 2019’s first half. Meanwhile hardship withdrawal levels stayed
consistent, with 1.1. DC plan participants engaging in that activity in 2019
Sarah Holden, ICI senior director of retirement and investor
research, indicated that the slight increase in DC plan participant withdrawals
in the first half of 2020 was “much smaller than you might expect, given the
severity of the COVID-19 economic downturn.” It’s possible that plan
participants are simply thinking long-term.
The report shows that the majority of plan participants are
not allowing volatility in the stock market to dramatically shift their asset
allocations. During the first 6-months of 2020, only 8.3% of DC plan
participants changed the asset allocation of their account balances compared to
the 6.1% who did so in the early half of 2019.
“These assets represent a pot of money that savers have earmarked
for retirement and they have consistently demonstrated that they generally stay
the course to reach that financial goal, even during challenging economic
situations,” Holden said in a press release.
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