1 WI analytics analysis of 2.5M loan takers. Secure loan takers are those who are highly compensated employees, contribute to the 402(g) limit or have a total savings rate (include employee and employer contributions) of >15%. Distressed loan takers are participants who have taken a hardship withdrawal in the last 12 months, whose outstanding loan balance to account balance ration is >50% or whose total savings rate is <=5%. Stressed loan takers are all other loan takers who do not meet the criteria of the other two categories.
2 Fidelity participant panel survey conducted May 18–June 1, 2016, with 743 respondents.
3 Fidelity Markers of Financial Wellness Survey of more than 6,000 active Defined Contribution plan participants recordkept by Fidelity, who have input into household financial decisions. Conducted by CMI Research, an independent third-party research firm. July 2016.
4 Hypothetical example compares retirement income for three employees; one who maintained their 401(k) savings rate, one who decreased their savings rate to 5% for 5 years and one who decreased their savings rate to zero for 10 years. The example uses the following assumptions about each person: Starts with $50,000 salary at age 25 which grows at a 1.5% real annual rate; contributes 6% of pay and receives 4% employer matching contribution; savings grow at a 3.2% real rate of return. Person 1 maintains their savings at the same rates stated previously. Conversely, person 2 decreases their total savings rate by 5% for a 5 year period beginning at age 35, then resumes saving at the original 6% and 4% employee and employer rates. Person 3 decreases their savings rate to zero for a 10 year period beginning at age 35. Consequently, based on the previously noted assumptions, person 2 and 3 experience a decrease in monthly income in retirement of $180 and $690 respectively. Upon retirement at age 67 both individuals draw down their account through age 93; all amounts are pretax, and are expressed in 2014 real dollars. Upon distribution applicable Federal, State, and local taxes may be due. No federal, state or local taxes, or any account fees or expenses were considered. If they were, results may be lower. For purposes of this illustration, lost earnings associated with any outstanding loan balance or balance increase due to loan repayments were not accounted for.
5 Based on Fidelity analysis of 22,400 corporate DC plans (including advisor-sold DC) and 15.4 million participants as of 12/31/2017.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917
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