Australia
Through a combination of increased contributions and high investment returns, workers’ retirement accounts bounced back from the early economic turmoil caused by the pandemic to reach historic levels, according to a new report by Alight Solutions.
Alight’s 2021 Universe Benchmarks report revealed that the average defined contribution (DC) plan balance hit an all-time high of $130,330 by the end of 2020. Last year also marked the first time the majority of plan participants (51%) were saving above 6%. Now, nearly a third of participants (32%) are saving between 7% and 10%, and nearly a fifth of participants (19%) are saving more than 10%. On average, participants saw more than $10,000 contributed to their accounts in 2020 with 36% of the contributions coming from employers.
“We know many employers, despite market pressures, remained steadfastly focused on financial wellbeing and helping workers navigate their financial situation,” said Rob Austin, head of research at Alight. “Our research shows that many workers matched their employer’s efforts by making prudent decisions of their own, including spending less so they can contribute more to their nest eggs.”
For workers who were adversely impacted by the pandemic, the CARES Act allowed them to withdraw money from their retirement accounts with more favorable tax treatment and longer repayment periods – and approximately 5% of participants took this action. The legislation also allowed plans to suspend loan repayments in 2020 for both new and existing loans.
“The Coronavirus-related distribution paired with deferral of loan payments was the best way to deliver relief to the people who needed it most,” added Austin. “Even so, the relatively low percentage of participants who withdrew money signals that most people don’t want to jeopardize their retirement security by tapping their accounts. Instead, they’ve shown interest in financial wellbeing programs that include emergency funds and alternatives to costly 401(k) loans and withdrawals.”
For more information and to access the complete report, please visit alight.com.