T. ROWE PRICE: 401(K) LOAN SIZES OUTPACED INFLATION IN 2024, HIGHLIGHTING THE IMPORTANCE OF EMERGENCY SAVINGS AND FINANCIAL WELLNESS FOR RETIREMENT SAVERS

Rhea-AI Summary

T. Rowe Price released its annual 401(k) benchmarking report revealing concerning trends in retirement savings behavior. The average 401(k) loan size increased by 4% in 2024, exceeding inflation rates, with increased borrowing across all age groups. Loan usage rose by two percentage points from 2023, though remaining below 2015-2019 levels.

A financial wellness survey showed 64% of participants cannot cover six months of expenses, with these individuals being twice as likely to take loans. The report highlighted that participants using target date products are 20 times less likely to make investment exchanges, with 84% staying within target date funds when they do make changes.

Notable findings include that 23% of participants aged 63+ are invested in different target years than the assumed retirement age of 65, and 55% of retirement-age participants exit the plan within four years of termination, while 50% of plan sponsors prefer participants maintain their balances in-plan during retirement.

Positive

• Participants using financial wellness resources show stronger savings behavior
• 84% of target date fund investors maintain disciplined investment strategy when making changes
• Plan sponsors are developing solutions to better accommodate retirees

Negative

• 401(k) loan sizes increased 4% in 2024, exceeding inflation
• 64% of participants lack adequate emergency savings
• Loan usage increased by two percentage points since 2023
• 55% of retirement-age participants exit plans within four years of termination

New report features latest trends in 401(k) plan design and participant behavior, based on the firm's recordkeeping client data for 2024

BALTIMORE, April 16, 2025 /PRNewswire/ -- T. Rowe Price, a global investment management firm and leader in retirement today published its annual benchmarking report on 401(k) plan design and participant behavior, and found the average loan size grew by 4%, slightly higher than inflation in 2024. Participants across all age groups saw increases in average loan size, including those closer to retirement age, suggesting that financial wellness challenges are not felt solely by younger age groups. Loan usage also saw an uptick, increasing by two points since 2023, but remains below the 2015 to 2019 highs.

Meanwhile, data from a financial wellness questionnaire, hosted by T. Rowe Price for its 401(k) participants, found that 64% of respondents are unable to cover six months' worth of expenses. Those who said they did not have six months of emergency savings were also two times more likely to have taken a loan.

"With rising inflation, market volatility, and ongoing economic shifts, the importance of emergency savings funds and financial wellness programs becomes even more clear," said Francisco Negrón, head of Retirement Plan Services at T. Rowe Price. "Plan sponsors play a critical role, especially under these circumstances, and can have a direct impact on the financial security of their employees."

Additional key findings include:

• Participants who engage with financial wellness resources and retirement income tools, like T. Rowe Price's Retirement Income Planner or Social Security Optimizer, tend to demonstrate stronger savings behavior.
• Participants invested solely in a target date product are 20 times less likely to make an exchange and even when they do, 84% of them exchange into another target date fund.
• Twenty-three percent of participants aged 63 and older are currently invested in different target years than the assumed retirement age of 65. As participants age, an increasing percent are invested in a fund with a target date year other than the assumed retirement age of 65, illustrating a potential need for more personalized target date solutions.
• Fifty-five percent of retirement age participants leave the plan within four years of termination and another roughly 20% leave in the following five years. Meanwhile, 50% of plan sponsors prefer their participants keep their defined contribution plan balances in-plan when they retire. More plan sponsors are starting to offer solutions to better accommodate retirees and have expressed interest in implementing retirement income solutions.

Negrón adds, "Our purpose in delivering this report is simple: to equip plan sponsors and financial consultants with the insights they need to improve the financial futures of their participants. Ultimately, T. Rowe Price is dedicated to helping every participant get on the path toward better retirement outcomes, because everyone deserves to feel confident about their financial future."

ABOUT T. ROWE PRICE

Founded in 1937, T. Rowe Price (NASDAQ – GS: TROW) helps individuals and institutions around the world achieve their long-term investment goals. As a large global asset management company known for investment excellence, retirement leadership, and independent proprietary research, the firm is built on a culture of integrity that puts client interests first. Clients rely on the award-winning firm for its retirement expertise and active management of equity, fixed income, alternatives, and multi-asset investment capabilities. T. Rowe Price serves millions of clients globally and manages US $1.57 trillion in assets under management as of March 31, 2025. About two-thirds of the assets under management are retirement-related. News and other updates can be found on Facebook, Instagram, LinkedIn, X, YouTube, and troweprice.com/newsroom.

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SOURCE T. Rowe Price Group

FAQ

What is the average 401(k) loan size increase reported by T. Rowe Price (TROW) in 2024?

T. Rowe Price reported a 4% increase in average 401(k) loan sizes in 2024, exceeding the year's inflation rate.

How many T. Rowe Price (TROW) 401(k) participants lack adequate emergency savings in 2024?

64% of T. Rowe Price 401(k) participants reported being unable to cover six months' worth of expenses.

What percentage of TROW retirement-age participants leave their 401(k) plans after termination?

55% of retirement-age participants leave the plan within four years of termination, with another 20% leaving in the following five years.

How do target date funds affect investment behavior according to TROW's 2024 report?

Participants invested solely in target date products are 20 times less likely to make exchanges, with 84% staying within target date funds when they do make changes.

What percentage of older TROW 401(k) participants deviate from standard retirement age investments?

23% of participants aged 63 and older are invested in different target years than the assumed retirement age of 65.