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Average 401(k) Balances Grow Nearly 10% in 2023

The report also found that a growing number of 401(k) participants are initiating withdrawals from their plans.

Data from Bank of America shows that average 401(k) balances increased by $7,250 (9.6%) since the end of 2022. The report also found that a growing number of 401(k) participants are initiating withdrawals from their plans. The number of participants taking hardship distributions increased 36% year-over-year, following increases in first quarter this year. In addition, the percent of participants borrowing from their workplace plan in second quarter also increased (2.5%, up from 1.9% in first quarter).

These findings are based on plan participants’ behavior in Bank of America clients’ employee benefits programs, which is comprised of more than 4 million participants as of June 30, 2023.

“The data from our report tells two stories – one of balance growth, optimism from younger employees and maintaining contributions, contrasted with a trend of increased plan withdrawals,” said Lorna Sabbia, Head of Retirement and Personal Wealth Solutions at Bank of America. “This year, more employees are understandably prioritizing short-term expenses over long-term saving. However, it’s critical that employees continue to invest in life’s biggest expense – retirement.”

Amid rising 401(k) plan withdrawals, employee contributions remained steady, with the average rate remaining at 6.5% throughout the first half of 2023. Meanwhile, more participants increased their rate than decreased their rate (10.2% versus 2.2%) in second quarter which was led by Gen Z and Millennial employees (19.3% versus 2.6% and 11%  versus 2.6%, respectively).

Health Saving Account and Financial Wellness Trends

To provide a more holistic look at confidence around financial preparedness, Bank of America has expanded the quarterly Participant Pulse report series to examine engagement across Health Saving Accounts (HSA) and overall feelings of financial wellness, in addition to 401(k) trends. Key HSA and financial wellness findings include:

  • HSA account balances increased by 11.9% over year-end 2022. Average HSA account balances increased from $3,931 to $4,397 in the first six months of 2023.
  • Many HSA account holders continue to save their contributions for future expenses. Nearly 4 in 10 account holders contributed more than they withdrew in second quarter, consistent with year-end 2022.
  • Baby Boomers invested their HSAs at higher rates than other generations. On average, only 12% of account holders invested their HSAs for future growth in second quarter, with Baby Boomers leading at 15%. In addition, more men invested than women (18% versus 11%).
  • Feelings of financial wellness declined slightly. Out of a possible 100 points, the average financial wellness score for employees was 56, down one point from 57 at year-end, with women trailing men (52 versus 59).

Read the full report and methodology (PDF) to learn more.