Even investors who understand the volatility of the stock market weren’t feeling good about the stocks that posted losses in 2022. The Standard & Poor’s 500 index fell nearly 20%, and the average workplace retirement plan balance dropped from $144,280 at the beginning of the year to $111,210 by the end of the year. Here’s a breakdown of how much retirement savers lost because of these: defined contribution plan.
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Alight’s 2023 Universe Benchmark Report examined data from approximately 3 million eligible participants across 100 retirement plans. His median plan balance fell to $23,818, the lowest in a decade. The median annual return in 2022 was -14.7%.
Other results from this survey were equally pessimistic. The average participation rate in workplace savings plans fell slightly from 84% in 2021 to 83% in 2022, while the average contribution rate fell from 8.6% to 8.3%.
Taking former employees into account, the percentage of those who continue to invest in workplace planning has dropped from 61% in 2021 to 55% in 2022. Such a withdrawal could indicate a worker. rolled money from a previous employer’s plan To your new employer account, or to your personal retirement account. It can also involve employees cashing in their accounts to save money for a side business or using it to meet financial obligations.
Despite the difficulties, workers focused on long-term savings
However, most workers 401(k) seconds saved Other employer-led plans continued, despite the increased cost of living due to high inflation.
“Most people didn’t have a drastic, off-the-cuff response to their investment,” said Rob Austin, head of research at Alight Solutions, in a statement. “Only 3% stopped contributing, and more than twice as many increased their contribution rates as those who reduced their savings.”
In 2022, the percentage of workers with less than two years of service and covered by a workplace plan increased by 30%. This indicates that more employees are saving for retirement through autoenrollment plans.
As for 2023 so far, market expectations have been even higher, with the S&P 500 overall up more than 14% by the end of June. Similarly, defined contribution plan balances, such as 401(k)s, have also increased over the year, according to the Investment Company Institute, with plan assets at $9.8 trillion at the end of the first quarter, down 5% quarter-on-quarter. % increased. End of 2022.
Conclusion
It’s been a tough year for the stock market for participants in workplace retirement accounts such as 401(k)s that fund retirement.Because of the long time horizon Most workers have a pension before retirement, but plan members tend to invest much or all of their contributions in stocks to achieve long-term post-inflation growth. But that also means weathering the inevitable market downturn.
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