The average 401(k) balance dropped by 20 percent in 2022 despite 39% of Americans increasing their contributions throughout the year. This was due to one of the worst years ever for stocks, with all three major indexes posting their worst year since 2008. 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. 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
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. This was mostly due to the plan's yearly automatic escalation, but many also initiated their own increases. 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. In 2021, 2.1% made the withdrawal, compared to 2.8% in the previous year. 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.
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. “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