Our proprietary data reveals how Americans changed their savings behaviors over the course of the COVID-19 outbreak as business and travel restrictions disrupted the U.S. economy. These insights serve as an early baseline for the evolution of savings plan contribution and withdrawal behaviors in response to the pandemic and subsequent passage of the CARES Act. We expect to see new trends emerge as financial markets continue to rebound and stabilize and as states across the nation gradually reopen their economies.
- Small business plans with 25 or fewer savers appear to have been much more significantly impacted by the pandemic. From March to May, these small businesses stopped contributions (including both employer and saver contributions) to their retirement plan at 5 times the rate of businesses with over 100 savers.
- 11.8% of employers stopped or decreased their retirement plan matching contributions as of the end of May. However, on a positive note, 7.5% of employers that had decreased their match in or after March had returned to their previous matching levels by the end of May.
- Overwhelmingly, 93.1% of retirement savers made no change to their savings rates, illustrating the positive value of automatic payroll deduction.
- Employer adoption of coronavirus-related distributions (CRDs) and expanded loan options offered through the CARES Act remains relatively low across all plans. However, larger plans with over 100 savers are adopting CRDs at a much higher rate (35.1%) than small plans with 25 or fewer savers (3.8%).
- From the last week of March through the end of May, there was a 20.8% decrease in the total dollars contributed to 529 accounts in the form of a one-time contribution. Alternatively, automated 529 contributions have seen little change over this same period, affirming the value of making savings automatic.
- The number of qualified 529 account withdrawals also decreased by 28.8% over this period, with the average amount taken per qualified withdrawal dropping by 22.5%.
In the face of COVID-19 and its related challenges, many Americans understandably adjusted their contributions to savings plans. However, the relatively small percentage of employers that reduced their retirement plan match at the start of the pandemic have already begun to revisit that decision. Additionally, most retirement and education savers aren’t tapping into existing savings and are making efforts to “stay the course.”
View and download the complete State of Savings report here.
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