Australia
A new report by Alight Solutions (NYSE: ALIT), a leading cloud-based provider of integrated digital human capital and business solutions, found that after a few years of turbulence, retirement savings are on the rise for US employees.
Alight’s 2022 Universe Benchmarks report revealed that the average defined contribution (DC) plan balance hit an all-time high of $144,280 at the end of 2021, up 10% from 2020. Median plan balances also increased, from $28,426 to $29,607, another record high.
“Seeing DC plan savings continue to increase in 2021 is positive indication employees are prioritizing the growth of their retirement nest egg,” said Rob Austin, vice president, head of research at Alight Solutions. “This trend indicates that now is the time for employers to consider additional avenues to help strengthen the broader financial wellbeing of their employees.”
Alight’s data also found that overall participation in employer-provided retirement plans is on the rise. Average plan participation rates were 84% in 2021, up from 80% in 2018. Most importantly, employees saved at higher rates than in 2020, with nearly a third (32%) saving between 7% and 10%, and more than a fifth of participants (21%) saving more than 10%. Alight’s research also showed more than 82% of workers are contributing at a level at or above the full matching threshold.
Other key findings:
- More than half of plans have at least 90% of their eligible workers participating in the plan. A decade ago, only about one-third of plans had an average participation rate of 90% or higher.
- The percentage of people using target-date funds plateaued. Before 2020, the percentage of people invested in target-date funds steadily grew to 76% but dropped to 72% in 2021.
- The median return for investors during 2021 was 13.8%, with two-thirds of investors achieving returns of 10% or more. Coupled with the high returns in 2019 and 2020, the median annualized three-year rate of return reached 17.3%.
- 401(k) loans are at record low levels. Fewer than one-fifth (19%) of participants have an outstanding loan–the lowest level seen since Alight began tracking this data in 2000.
- Withdrawals decreased. Only 5% of individuals took a withdrawal from their 401(k) plan in 2021.
For more information, and to access the complete report, please visit alight.com.
About this report
Universe Benchmarks is Alight Solutions’ annual report showing how workers are saving and investing in defined contribution (DC) plans. The 2022 version is based on more than 100 plans covering three million eligible participants and highlights the most common benchmarks for DC plans: participation rates, savings rates, plan balances, investment and trading activity, and distributions from accounts (e.g. loans, withdrawals, cash-outs, and rollovers). Deeper insights by age, gender, tenure, and industry are available by request.