Bank of America's latest Participant Pulse report indicates that American workers continued to prioritize retirement savings in the first quarter of 2025, even as some participants tapped their workplace accounts for financial support. The average 401(k) contribution rate rose to 7.3% as of March, while the average participant contribution reached $2,150 during the quarter, up from $1,470 in the fourth quarter of 2024 and modestly higher than the $2,080 recorded a year earlier.
Baby boomers demonstrated particularly strong savings behavior, with 45% of that cohort contributing more than 7% of their pay to retirement plans. Average account balances held relatively steady at $112,070, compared with $113,590 at year-end 2025. Participants in plans featuring both automatic enrollment and automatic contribution increases accumulated significantly larger balances, averaging more than $170,000.
Retirement borrowing declined further in the quarter. Just 1.9% of participants took a loan from their workplace retirement plan, down from 2.3% in the previous quarter. However, the average loan amount climbed to $10,400 from $9,300. At the same time, loan defaults ticked higher, with 10.5% of participants with outstanding loans in default, compared with 10.4% at the end of 2025. Bank of America said the increase reversed the downward trend seen over the past year.
Overall, 19% of participants currently have a loan outstanding, with Generation X leading all age groups. More than one in four Gen X participants carry a loan balance, according to the report. This trend aligns with broader concerns about retirement readiness, as highlighted in recent surveys from Gallup and Ameriprise, which reveal persistent retirement anxiety despite short-term confidence. Gallup and Ameriprise Surveys Reveal Persistent Retirement Anxiety Despite Short-Term Confidence
Hardship withdrawals were largely unchanged. About 0.77% of participants took a hardship distribution during the quarter, consistent with the prior quarter. The average withdrawal totaled $5,270, roughly in line with the $5,440 reported in the fourth quarter. While hardship activity remained stable, fewer participants taking distributions used them for hardship purposes. In the first quarter, 6.7% of all participants who took a distribution did so as a hardship withdrawal, down from 7.4% in the prior quarter.
The report also highlighted continued engagement with health savings accounts. Average HSA balances slipped to $5,400 from $5,600 at year-end 2025, but account holders directed more of their contributions toward future savings. Thirty-nine percent of contributions were saved, while 61% were spent on current healthcare expenses. This shift toward saving may reflect growing awareness of HSAs as a long-term retirement tool, a topic explored in a recent Fidelity study that found 43% of stock plan participants are first-time investors, reshaping retirement saving. Fidelity Study: 43% of Stock Plan Participants Are First-Time Investors, Reshaping Retirement Saving
The data underscores the importance of plan design features such as automatic enrollment and escalation, which appear to boost savings outcomes significantly. As advisors work with clients on retirement strategies, these findings may inform conversations about contribution rates, loan management, and the role of HSAs in overall financial planning. The persistent loan defaults among Gen X participants, in particular, warrant attention, as this cohort approaches retirement with higher debt levels.
Overall, the Bank of America report paints a picture of a retirement system under strain but showing resilience. While contribution rates are rising and borrowing is declining, the uptick in loan defaults and the steady rate of hardship withdrawals suggest that some participants continue to face financial pressures. Advisors may find value in discussing these trends with clients to ensure they are on track for a secure retirement. For more on how wealth events are driving family offices toward institutional governance, see the Morgan Stanley report. Wealth Events Drive Family Offices Toward Institutional Governance, Morgan Stanley Finds
