401(k) Balances Drop 20% in 2022, 39% Increase Contributions
By The average 401(k) balance dropped by 20 percent in 2022 despite 39% of Americans increasing their contributions throughout the year.[0] This was due to one of the worst years ever for stocks, with all three major indexes posting their worst year since 2008.[1] Research reveals that at the end of 2022, the average participant account balance at Vanguard had decreased by 20%, amounting to $112,572, compared to that of the previous year.[0] At the end of the year, the median balance (with half of the accounts having a balance greater than this amount, and half below) was $27,376, representing a 23[1]
Despite the poor market performance, there was positive news from the data. 39% of participants increased their deferral rate, which is the portion of their paycheck moved into their 401(k) accounts.[0] This was mostly due to the plan's yearly automatic escalation, but many also initiated their own increases.[1] Additionally, only 9% decreased their contributions – a much smaller proportion than those who increased.
Although hardship withdrawals ticked up, they remain a small share of all participants.[1] In 2021, 2.1% made the withdrawal, compared to 2.8% in the previous year.[1] The report also revealed that 66% of participants were in professionally managed allocations with 79% maintaining a balanced strategy – both of which are up slightly from the previous year.[2]
Vanguard's head of strategic consulting, Dave Stinnett, commented on the findings: “Despite economic headwinds, we were pleased to see that participant behavior in retirement plans remained in line with previous years, and most participants continued to maintain a long-term view.[0]
0. “Average 401(k) dropped 20% in 2022 – despite 39% of Americans increasing their contributions” Daily Mail, 17 Feb. 2023, https://www.dailymail.co.uk/news/article-11764683/Average-401-k-dropped-20-2022-despite-39-Americans-increasing-contributions.html
1. “Average 401(k) balances dropped 20% in 2022 — but few investors flinched, Vanguard research shows” msnNOW, 17 Feb. 2023, https://www.msn.com/en-us/money/markets/average-401-k-balances-dropped-20-in-2022-but-few-investors-flinched-vanguard-research-shows/ar-AA17CSDf
2. “The Average 401(k) Fell By an Obscene Amount in 2022” Henry Herald, 18 Feb. 2023, https://www.henryherald.com/arena/the-average-401-k-fell-by-an-obscene-amount-in-2022/article_2ef6a6a8-79ee-54d5-8e9f-a25e6bce3fe7.html
