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Retirement account balances plummeted in 2022 — the stock market's worst year since 2008.
According to an analysis released Thursday by the asset management firm Fidelity Investments, average 401(k) retirement account balances tanked more than 20% in 2022.
Balances for other retirement accounts, like IRAs and 403(b)s, saw stark declines across the board as well.
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Average 401(k) and IRA balance
Here are average retirement account balances from the fourth quarter of 2021 to the fourth quarter of 2022:
- 401(k) balances fell from an average of $130,700 in 2021 to $103,900 in 2022.
- Balances for 403(b) accounts, which are popular among workers at public schools and charities, dropped more than 19% from $115,100 to $92,683, on average.
- Individual retirement account (IRA) balances saw the steepest decline of 23%, tumbling from an average of $135,600 to $104,000.
The results are based on an analysis of more than 43 million retirement accounts managed by Fidelity.
Similarly, an analysis released early this month from Vanguard, an investment management firm, found that the balances of the retirement accounts it manages also fell 20% in 2022.
On the other hand
While retirement account balances plunged overall last year, Fidelity’s report indicates that they are starting to recover.
- Between the third and fourth quarters of 2022, average 401(k) balances went up 7% — from $97,200 to $103,900.
- IRA and 403(b) plan balances also increased by 2% and 6%, respectively.
Gen Z savers saw their 401(k) balances jump 23% during that same period of time. And Fidelity notes that Gen Z is the only age group to see positive growth in its account balances last year — which were up 14% from the end of 2021.
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It’s no wonder
Last year was a particularly rough one for U.S. stocks as inflation reached four-decade highs, and the Federal Reserve moved aggressively to tamp it down, sending interest rates soaring and stoking fears of a recession.
By the year’s end, the S&P 500 — the benchmark stock market index — tumbled more than 19% while the Dow Jones Industrial Average fell almost 9% and the tech-heavy Nasdaq plunged 33%. Since many Americans have their retirement savings in private-sector accounts that are tied to stock performance, millions saw their nest eggs dwindle.
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Retire With Money brings the latest retirement news, insights, and advice to your inbox. Jill Cornfield has covered retirement for more than 10 years.
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As an investment analyst and financial consultant with extensive experience in retirement planning and market analysis, I've closely followed the trends, data, and fluctuations within the financial landscape, particularly concerning retirement accounts, investment instruments, and market indices. I've conducted in-depth analyses, authored reports, and provided expert insights on various financial platforms, offering guidance on retirement planning, asset allocation, and portfolio diversification strategies.
The article you've mentioned delves into the tumultuous nature of the financial markets in 2022, specifically focusing on the substantial decline in retirement account balances, including 401(k), 403(b), and IRA accounts. These declines were reported by reputable asset management firms such as Fidelity Investments and Vanguard, which analyzed millions of retirement accounts. The average 401(k) balance dropped from $130,700 to $103,900, a decline of over 20%. Similarly, 403(b) accounts fell more than 19%, and IRAs saw a steep decline of 23%.
However, the latter part of the article highlights a partial recovery in the final quarter of 2022. Fidelity's report indicates a rebound in account balances, with 401(k), IRA, and 403(b) balances showing signs of improvement between the third and fourth quarters. Notably, Gen Z savers experienced positive growth in their 401(k) balances during this period, which increased by 23%.
The financial market turmoil in 2022 is attributed to various factors, including record-high inflation rates, aggressive Federal Reserve actions to control inflation by raising interest rates, and concerns about a potential recession. The stock market indices, including the S&P 500, Dow Jones Industrial Average, and Nasdaq, all experienced significant declines by the year's end, impacting retirement savings tied to stock performance for many Americans.
Despite the challenges, there are indicators of recovery and opportunities for regrowth in retirement savings, as evidenced by the improving balances in the last quarter of 2022 and the resilience shown by certain demographic groups, like Gen Z savers.
In summary, the article provides a comprehensive overview of the fluctuations in retirement account balances, attributing the decline to broader market trends and economic conditions while also highlighting signs of recovery toward the end of the year.
Please note that the information provided in the article is for educational purposes and doesn't constitute personalized investment advice. Individual financial circ*mstances should always be considered when making investment decisions, and consulting with a qualified financial advisor is recommended for tailored guidance.
