Those of us involved with retirement plans have become accustomed over the past few years to bad news and dire warnings about the retirement crisis. Then, in March 2020, the COVID-19 pandemic hit. This only increased the intensity of the gloom and doom predictions for retirement savings and the ability of working Americans to provide for a successful retirement.

Major concerns centered on expected increases in loans and hardship distributions, including Coronavirus Related Distributions (CRDs) as permitted by the CARES Act, and reductions in both participant and employer contributions. Given the nature and extent of the pandemic, these concerns were certainly valid. This is why I have been pleasantly surprised by recent reports on 401(k) data for 2020. These reports from Fidelity Investments, Principal Financial Group, T. Rowe Price, and LT Trust, as reported on the 401(k) Specialist website, provide useful insight on how plan participants fared in 2020.

Principal’s analyses of the plans they administer resulted in the following findings(1):

  • Only 6% of participants in plans offering CRDs actually took one. The average amount was slightly less than $17,000.
  • Loan activity in 2020 was actually down 20% from 2019; although, the average loan amount increased 16%.
  • Less than 2% of plans suspended matching contributions.
  • The vast majority of participants (95%) did not make any investment changes.

Consistent with Principal’s findings, Fidelity also reported that only 6.3% of participants in their plans which adopted a CRD option actually took one(2).

Fidelity also reported on savings rates and account balances in 2020(2):

  • The average 401(k) balance in their plans increased 8% and the average IRA balance increased 11%.
  • Average savings rates reached record levels (9.1% for participant contributions and 13.5% including employer contributions). A large number of employees (33%) increased their contribution rate.

LT Trust also reported that average contributions and account balances increased in all 50 states(3). Notably, the average employee 401(k) contribution increased approximately 6%.

The takeaway from these analyses is generally positive. Overall, the impact of the pandemic on retirement savings in 2020 was not as bad as once feared. Only a relatively small number of participants resorted to taking distributions from their retirement accounts. On average, employee contribution rates and account balances increased. It also appears that most participants didn’t panic and make extreme changes in their accounts. Thus, on the whole, these findings represent very good news.

It would be neglectful not to mention that these statistics, while encouraging, are averages that can hide negative impacts of the pandemic. While the average results are positive, they cover up the deep financial hardship many Americans have had and continue to face. Some have been harder hit than others with job or wage loss and had to dip into their retirement savings to make ends meet.

Taking a bit of a leap, I believe that the positive findings are due in part to the initiatives of Plan Sponsors and their advisors to provide good plans, along with education and other tools for their employees. It also points to the benefits of financial wellness programs. An additional step that sponsors could consider, if they haven’t already, is assisting employees with establishing an “emergency” fund. In our next article, we will discuss how emergency savings accounts, funded through payroll deductions, can diminish retirement account withdrawals and boost financial wellness.

(1) Anderson, B. (2021, March 01). By the Numbers: 401k Plan CARES Act Activity. 401(k) Specialist.
(2) Anderson, B. (2021, February 18). Fidelity: Retirement Balances (and 401k Millionaires) Hit Record Levels in 2020. 401(k) Specialist.
(3) Anderson, B. (2021, March 01). Up in All 50: Average 2020 401k Growth and Balances by State. 401(k) Specialist.

If you have any questions or comments on employee benefit plan matters, please call or email Rich Baker. He can be reached at 415.869.5578 or

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