- The average 401(k) loan size increased by 4% in 2024, outpacing inflation rates, as reported by T. Rowe Price (TROW, Financial).
- 64% of T. Rowe Price 401(k) participants are unable to cover six months of expenses, underlining the need for emergency savings.
- 23% of participants aged 63 and older invest in target years that differ from the assumed retirement age of 65.
T. Rowe Price (TROW) has released its annual benchmarking report on 401(k) plan behavior, revealing a 4% increase in the average 401(k) loan size in 2024, surpassing the inflation rate. This trend was observed across all age groups, including those nearing retirement age, indicating broad financial wellness challenges among participants.
The report highlights the importance of financial preparedness, as 64% of participants stated they could not cover six months of expenses, being twice as likely to take loans as those with adequate savings. Moreover, 55% of retirement-age individuals exit their plans within four years post-termination, with another 20% leaving in the next five years, despite half of plan sponsors preferring in-plan retention of balances during retirement.
Participants using target date products demonstrated more disciplined investment behavior; they were 20 times less likely to make investment exchanges, and 84% executed changes within target date funds. Furthermore, 23% of participants aged 63 and older are invested in target years differing from the assumed retirement age of 65, suggesting a need for more personalized retirement solutions.
T. Rowe Price's findings emphasize the critical role of plan sponsors in enhancing participants' financial security, urging the adoption of financial wellness programs and retirement income solutions to support better retirement outcomes.
