The 401(k) Crash: U.S. Retirees Impacted By Unexpected Losses in 2022

Retirement 401(k) accounts are often seen as a safe haven for retirees, but last year presented a unique set of challenges that caused many retirees to take a significant loss in their accounts.

Market volatility, record inflation, a slowing economy, and a lack of safety nets for retirees led to a difficult year for those who were planning to rely on their retirement accounts for income.

Unfortunately, many retirees saw their retirement accounts drop significantly, leaving them with fewer resources to rely on for their future, according to a new report by Fidelity, a financial services firm that manages more than 35 million retirement accounts.

The analysis revealed that retirement account balances in 401(k) plans lost more than one-fifth of their value, with the average balance down to $103,900 – a 20.5% drop from the previous year.

A 401(k) is a retirement savings plan that is offered by many employers to their employees that allows workers to contribute a portion of their salary to the account, which is then invested in various stocks, bonds, and mutual funds.

The contributions made to a 401(k) account are pre-tax, which means that they are not taxed until they are withdrawn from the account.

These numbers are certainly alarming, and they are indicative of the economic challenges that many individuals and families faced over the past year.

Retirees are Not the Only Group Affected

A recent study by Bankrate found that across all ages and income levels, at least one-third of adults said they are likely to have less in savings now compared with a year ago.

This is a concerning trend, and it highlights the importance of taking a proactive approach to saving for retirement.

Despite this decline, Americans continue to put money into their 401(k)s, with the contribution rate holding steady at 13.7% last year.

Approximately one-third of workers increased how much they put away, with pre-retirement baby boomers saving the most, contributing 16.5% of their income into retirement plans.

Women tended to save slightly more than men at 11.7% versus 11.5%, according to Fidelity.

Some Positive Trends Found 

The fourth quarter of 2022 showed a small glimmer of hope, as average 401(k) balances went up by 7% from $97,200 to $103,900.

During this same period, IRA and 403(b) plan balances also increased by 2% and 6%, respectively.

Meanwhile, Gen Z savers saw their account balances jump by 23% during the same period, which were up 14% from the end of 2021, making them the only age group to see positive growth in their account balances last year, according to Fidelity.

Despite the ups and downs of the market, financial advisors say it is important for workers to continue contributing to their retirement accounts.

“We always recommend keeping contributions steady and avoiding panic selling during market dips,” said Chris Lean, Investment Director, Aisa International. “As always, it is crucial to consult with a financial advisor to develop a retirement savings plan that meets your specific needs and goals.”

While the decline in 401(k) account balances last year was undoubtedly disappointing for many individuals and families, most experts agree it’s important to stay optimistic and continue to make contributions to these accounts.

“Although 2022 was a challenging year for retirement savings, individuals who are able to keep saving diligently for their golden years could see long-term gains as the market recovers and inflation subsides,” Lean added.


The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.


Chris Lean

Chris is a Chartered Financial Planner who writes blogs and articles to simplify and explain some of the financial issues that affect UK expats. Subjects include; hot topics, regulation and the ever-changing world of finance.

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