Americans Saving More in 401(k)s and HSAs

In another of the “what a difference a year makes” cliche, a newly released study finds that, not only did 401(k) balances bounce back from 2022, but other indicators were also trending in the right direction.  

Bank of America Retirement and Personal Wealth Solutions’ fourth quarter 2023 Participant Pulse reveals that average 401(k) account balances rose 15% to $86,280 in 2023—increasing from $75,045 at the end of 2022. According to the report, this was due to a combination of participants contributing higher amounts to their plans and increases in the value of investments. 

What’s more, the percentage of plan participants who increased their 401(k)-contribution rate doubled in the fourth quarter, the report notes. Nearly 18% of 401(k) plan participants increased their contribution rates last quarter, up from just over 9% who did so in the third quarter. 

The report also found that fewer participants borrowed from their 401(k) plan. In this case, 2.3% of participants borrowed from their plan in the fourth quarter, down from 2.5% in the third quarter. Meanwhile, the average loan per participant declined to $8,210, down from $8,530.

The Pulse monitors the behavior of plan participants, providing a real-time snapshot of 401(k) contribution rate, loan and hardship distribution trends based on Bank of America’s 401(k) recordkeeping clients comprised of more than 4 million participants as of the end of 2023.

“We were encouraged to see more plan participants taking positive actions in their accounts in the fourth quarter,” said Lorna Sabbia, Head of Retirement and Personal Wealth Solutions at Bank of America. “These insights offer signs that people are prioritizing their retirement savings, with more employees increasing their contribution rates and fewer taking hardship distributions.”

HSA Trends

In addition to the positive 401(k) trends, Bank of America also found improvement with health savings account (HSA) balances.

Here, the Participant Pulse shows that year-end 2023 HSA balances, on average, increased 11%, rising to $4,380 in 2023, up from $3,930 at year-end 2022. In addition, nearly 4 in 10 account holders contributed more than they withdrew—a finding that hasn’t always been the case.

Millennials were also found to have saved more of their HSAs. Overall, 76% of HSA contributions were spent on health care expenses, while 24% was saved. Perhaps somewhat surprisingly, Millennials saved 34% of their contributions, more than any other generation.

Bank of America’s report also shows that more men than women invested their HSA contributions. Still, only 12% of account holders invested their HSA contributions for future growth, with men outpacing women 17% vs. 11%.