Despite Decrease in Balances, 401(k) Data Reveals Optimism
By The latest data from Vanguard and Fidelity shows that 401(k) balances have decreased significantly in the last year, with an average decrease of 20% in 2022 to $112,572.[0] This is in line with other research showing a depletion in emergency savings for many adults.[1] To compound matters, IRA balances also decreased by 20%, to an average of $104,000.[1]
Fidelity reported that total savings rate for the fourth quarter held steady at 13.7%, compared to 13.8% and 13.9% in the prior two quarters.[2] Additionally, pre-retirement Boomers saved at the highest levels (16.5%), while Gen Z savers were fairly consistent at 10.2%. Women tended to save slightly more than men at 11.7% versus 11.5%.[3]
The 401k Averages Book 23rd Edition also showed total investment costs declined between 0.02%-0.05% from last year, with the average representing a decrease of 0.03%. Joseph W. Valletta, author of the 401k Averages Book, declared that in 2022, investment related fees paid by participants continued to drop. He noted that the decrease in investment fees will serve as a significant benefit to participant balances in the long run.[4]
Despite the decrease in balances, the report showed that people are still making an effort to save for retirement. Fidelity reported that the number of IRA accounts held by Gen Z savers climbed 71%, while millennial accounts jumped by 22%.[5] Moreover, Roths tend to be the retail retirement savings vehicle of choice, with 61.3% of all contributions going into a Roth in Q4 2022.[6]
Unfortunately, the data also reveals a concerning trend, as nearly half of all retirees now expect to outlive their current savings.[7] This is compounded by the fact that more than 25% of 401(k) participants contribute 3% or less of their income toward retirement savings, and 43% of baby boomers are only contributing 3% of their income or less.[8]
Despite the decrease in balances, the data still shows that people are making an effort to save for retirement.[9] The report revealed that pre-retirement Boomers are saving the most, and Gen Z is still saving a healthy 10.2%. Investment fees continue to decline, with total investment costs dropping between 0.02%-0.05% from last year.
Overall, the report showed general optimism.[10]
0. “401(k) Balances Plunge by 23% in 2022” Newsmax, 23 Feb. 2023, https://www.newsmax.com/finance/streettalk/401k-balances-fidelity-vanguard-data/2023/02/23/id/1109883/
1. “Fidelity: Retirement savers pay the price as 401(k) balances decrease by 23% in 2022” Techstory, 24 Feb. 2023, https://techstory.in/fidelity-retirement-savers-pay-the-price-as-401k-balances-decrease-by-23-in-2022/
2. “Retirement Accounts Up Despite Inflation, Volatility | PLANSPONSOR” PLANSPONSOR, 23 Feb. 2023, https://www.plansponsor.com/retirement-accounts-up-despite-inflation-volatility/
3. “401K Plan Balances Fell Sharply In 2022, Fidelity Data Shows” news9.com KWTV, 24 Feb. 2023, https://www.news9.com/story/63f8c624636fd0209601473e/401k-plan-balances-fell-sharply-in-2022-fidelity-data-shows
4. “401k Averages Book Finds 401(k) Partcipant Investment Fees Declined 3%” EIN News, 22 Feb. 2023, https://www.einnews.com/pr_news/618455700/401k-averages-book-finds-401-k-partcipant-investment-fees-declined-3
5. “401(k) and IRA Balances Plunged Over 20% in 2022” Investopedia, 23 Feb. 2023, https://www.investopedia.com/401-k-and-ira-balances-plunged-in-2022-7113335
6. “Fidelity® 2022 Retirement Analysis: In the Midst of Inflation and Uncertainty, Retirement Account Balances Are Rising” Yahoo Life, 23 Feb. 2023, https://www.yahoo.com/lifestyle/fidelity-2022-retirement-analysis-midst-133000050.html
7. “Retirement analysis: Fidelity reveals average 401(k) lost 23% in 2022” Seeking Alpha, 24 Feb. 2023, https://seekingalpha.com/news/3940458-retirement-analysis-fidelity-reveals-average-401k-lost-23-in-2022
8. “401(k) Contribution Rates Are Down. Here's Why That's a Problem” msnNOW, 12 Feb. 2023, https://www.msn.com/en-us/money/retirement/401-k-contribution-rates-are-down-heres-why-thats-a-problem/ar-AA17nKOV
9. “401(k) balances rise, despite economic and market challenges” ABC17News.com, 23 Feb. 2023, https://abc17news.com/news/2023/02/23/401k-balances-rise-despite-economic-and-market-challenges/
10. “Retirement Planning: Average 401(k) Balances Fell 20% in 2022 — Will It Be a Trend?” GOBankingRates, 21 Feb. 2023, https://www.gobankingrates.com/retirement/401k/retirement-planning-average-401k-balances-fell-will-it-be-a-trend/
