Participation in defined contribution retirement plans reached an all-time high last year, according to a report by Aon Hewitt.
Nearly four-in-five (78 percent) of those eligible put money into DC accounts, the report said, and the average before-tax contribution rose from 7.2 percent to 7.3 percent. Nearly three-quarters of workers (72.5 percent) saved more than the company match.
Aon also reported that the average participant’s plan balance was back to pre-recession levels at $81,240. That compared to $57,150 in 2008. The median balance was reported at $25,150, up from $23,370 in 2011.
The 12th annual report, 2013 Universe Benchmarks, examined the savings and investment habits of 3.5 million eligible employees in 141 defined contribution plans. Ninety percent of the plans offered a company match to contributions.
One ongoing area of concern was the percentage of workers who cash out their retirement accounts when they leave a job. Those who choose to liquidate their accounts incur a tax a liability and, depending on their age, a 10 percent penalty.
In all, 43.1 percent, about the same as a year earlier, chose to take the money, Of those with more than $100,000 far fewer (7 percent) did so. Those with less than $1,000 (81 percent) and $1,000 to $4,000 (47 percent) were most likely to withdraw their money.
Another area of concern continues to be hardship loans. More than one in 10 (12.5 percent) took out loans last year. About half (53.7 percent) of all such loans were related to foreclosures and evictions. Other top needs for the loans were medical (14.6 percent), education (12.9 percent) and home purchase (5.3 percent).
The percentage with outstanding loans was flat from the previous year at 26 percent. About 90 percent of loans were to those between the ages of 30 and 60. Gender was not a factor in loan behavior with men (26.3 percent) and women (26.9 percent) equally as likely to borrow against their retirement accounts.
Taking out a loan created a double-whammy of sorts. Besides losing out on investment return from money taken out in loans, those with loans saved at a lower rate of their salary (6.3 percent) compared to those without loans (7.9 percent).