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T. Rowe Price retirement plan participants deferred on average 8.5% of their salary in the first half of 2023 despite continued inflation, up slightly from their 8.4% average deferral rate in the second half of 2022, new data shows.
Inflation in the U.S. was 5.4% at the end of June, down from 5.6% in January, according to the latest available data from the Bureau of Labor Statistics.
Across 10 different industry categories, employees either modestly increased or kept flat their retirement plan contributions between the first and second quarter of 2023, T. Rowe Price data showed.
Employer Industry | 2023 average deferral rate | Q2 2023 average deferral rate | Q1 2023 average deferral rate | Q4 2022 average deferral rate |
Leisure and Hospitality | 8.5% | 8.0% | 8.1% | 7.1% |
Financial Services | 8.5% | 8.6% | 8.6% | 7.9% |
Health Care and Social Assistance | 8.5% | 7.5% | 7.5% | 7.0% |
Information Services | 8.5% | 9.6% | 9.5% | 9.3% |
Manufacturing | 8.5% | 8.5% | 8.5% | 7.9% |
Professional and Business Services | 8.5% | 9.3% | 9.3% | 8.9% |
Retail Trade | 8.5% | 8.4% | 8.3% | 8.0% |
Transportation and Warehousing | 8.5% | 8.2% | 8.1% | 7.9% |
Utilities | 8.5% | 10.7% |
| 9.7% |
Wholesale trade | 8.5% | 8.1% | 8.1% | 7.9% |
-Source: T. Rowe Price data.
While contributions remained relatively level in 2020, the data shows that T. Rowe Price plan participants are beginning to take plan loans at pre-pandemic rates.
T. Rowe also found that participants are half as likely to use auto-escalation when taking a loan or hardship withdrawal.“The good news we’re seeing is that even as U.S. personal savings rates decline and credit card balances continue to climb, retirement savings levels remain steady,” Rachel Weker, senior retirement strategist for retirement plan services at T. Rowe Price, wrote in an email. “We’re also seeing more than 50% of participants taking advantage of automation to continue to increase their savings levels to target levels.”
Plan sponsors have informational tools available to urge participants to bolster their retirement readiness, the report specified, including videos that can increase participation and engagement by delivering education and calling on participants to act.
Participants who watched a video about retirement income were five times more likely to visit a webpage with planning resources and were twice as likely to increase their deferral rates than workers who did not, the data showed.
The report recommended opportunities for retirement professionals and questions to consider—such as do participant loan trends indicate any underlying financial wellness challenges? The solutions T. Rowe Price recommends include:
- Foundational financial wellness education;
- Assistance with student loan repayments; and
- In-plan or out-of-plan emergency savings solutions.
T. Rowe Price also recommended solutions for plan sponsors considering the needs of pre-retirees and retirees in their plans, including:
- Plan design features for retirees;
- Advice and guidance;
- Income-generating investment solutions; and
- Communications focused on catch-up contributions
Information in the report was based on data from plans recordkept by T. Rowe Price as of June 30 for plans with approximate asset levels greater than $25 million.
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