Average 401(k) balances at Bank of America-administered plans climbed 9.8% from year-end 2025 to $122,560 by September, yet hardship distributions rose on every measure tracked during the same period. The split runs through the Q3 2026 Participant Pulse, the company’s quarterly snapshot of more than four million plan participants.
Bank of America’s workplace benefits division, which has a commercial interest in plan participation, publishes the index quarterly. The Q3 edition found the average 401(k) contribution rate holding at 7.3%, consistent with the prior quarter. Boomers continue to lead across generations, with nearly half contributing more than 7% of their pay. Among Gen X workers, nearly two in five exceed that threshold. Among millennials, one in four do.
The figure that stands out for plan sponsors and their advisors is the balance differential tied to plan design. Participants in plans with auto-enroll and auto-increase features held average balances above $190,000 as of September, more than $67,000 above the overall average. That gap reflects the compounding effect of automatic contribution escalation over time, and it arrives as plan sponsors continue working through SECURE 2.0 requirements that mandate auto-enrollment for most 401(k) plans established after December 2022, effective for plan years beginning after December 31, 2024.
For advisors working with plan sponsors on plan design, this is the kind of concrete outcome data that moves conversations beyond compliance and into strategy. Separate Gallagher research covering 3,717 US organizations found that most employees doubt their current retirement savings strategy will get them to their goals, which makes plan design a client conversation with measurable stakes on both sides.
The strain side of the data is harder to dismiss. The share of participants taking a hardship distribution rose to 1% in Q3, up from 0.88% in Q2 and 0.79% in Q3 2025. The average hardship amount increased to $5,220 from $4,990 the prior quarter. As a share of all distributions, hardships accounted for 8.8%, up from 7.7% in Q2 and 7.6% a year earlier. Loan activity also ticked up, with 2.6% of participants borrowing from their retirement plan in Q3, compared with 2.4% in Q2.
The trajectory is consistent enough across three consecutive quarters to signal sustained pressure, rather than seasonal noise. That trend has broader support. Vanguard’s How America Saves 2026 report found that 6% of participants in its plans took hardship withdrawals in 2025, the sixth consecutive annual increase and more than triple the pre-pandemic rate.
The health savings account (HSA) data offers a partial counterweight. The share of contributions saved rather than spent on current healthcare expenses jumped to 28% in Q3, up from 19% in Q2, and comparable to the 27% recorded in Q3 2025. Gen Z led the shift, saving 64% of contributions, followed by millennials at 38%. That behavior runs counter to the typical HSA pattern, where the majority of contributions are spent on current healthcare expenses rather than carried forward.
The growth in HSA investment assets reflects a broader reorientation of the account type, particularly among younger employees who are increasingly treating HSAs as long-term savings vehicles rather than healthcare spending accounts.
Average HSA balances reached $6,090 in Q3, consistent with the prior quarter and up nearly 9% since year-end 2025.
