Pandemic Prompts Many to Take More Notice of Retirement Plan

Providers saw an increase in the use of digital tools, prompting some plan participants to save more.

Major retirement plan recordkeepers have found that the COVID-19 pandemic prompted many Americans to take better stock of their retirement and emergency savings. Many even increased their 401(k) contributions, and only a small percentage took out a coronavirus-related distribution (CRD).

TIAA found that more than three-quarters of participants in the plans it recordkeeps checked their account balance last year and 61% visited a provider website. This engagement, TIAA says, was likely driven by the dramatic volatility of the year. TIAA found also found that 30% of participants increased their plan contribution. Likewise, Fidelity Investments saw 33% of the participants in its plans increase their contribution.

TIAA says that among those who increased their contribution, 48% said they did so after using an income projection tool.

“In the past year in particular, people have become more engaged with their retirement plan,” Dan Keady, chief financial planning strategist at TIAA, tells PLANSPONSOR. TIAA has seen this engagement through its website traffic, call center activity and participation in various participant webinars it has held in the past year, Keady says.

“They value the importance of their retirement plan more than ever before and are coming around to the fact that paying attention to their account is the right thing to do,” he says. “I think that in a year of such uncertainty, people wanted to take control of the things they could. They discovered that using the calculators and planning tools we offer can help them envision their lifestyle in retirement, and they can see that making even small changes today in terms of increasing savings can have a big outcome decades down the road. That makes the 30% increase in contributions an even more significant figure, given that many people experienced extreme financial duress in 2020.”

Keady says he is also encouraged that participants and sponsors alike are beginning to explore retirement income.

“Many institutions are equating what an individual’s savings can produce in the future,” Keady says. “People are becoming increasingly interested in this concept of lifetime income. All of these factors are coming together in a very positive way.”

Fidelity has witnessed a 40% year-over-year increase in traffic to its digital net benefits site, where retirement plan participants can see their balance and make changes, says Eliza Badeau, vice president of thought leadership at Fidelity. Many visited Fidelity’s COVID-19 resource center to find out what relief is available to them and to seek guidance on sound uses of their stimulus money, Badeau says. Fidelity also found that only 12% of participants changed the asset allocation of their accounts last year. “Most didn’t react to the volatility,” she says.

Only 1.6 million participants in Fidelity plans took a CRD, averaging $9,400, she notes. This was only 6.3% of eligible employees, she adds.

“These figures are all good signs that people took only what they needed and did not come back for more,” she says.

Another positive sign from 2020 is that more employers are encouraging people to create emergency savings, she continues. “Overall, we saw positive behavior in 2020, despite the pandemic and market volatility.”