Retirees Lost 23% of Their 401(K) Savings in 2022, Fidelity Says

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  • Retirement account balances in 401(k) plans lost nearly one-quarter of their value in 2022, according to Fidelity's analysis.
  • Amid ongoing high inflation and economic uncertainty, nearly half of retirees expect to outlive their savings.

In a year marked by stiff economic headwinds, retirement savers paid the price.

Although the average 401(k) balance rose in the fourth quarter of last year, balances ended 2022 down 23% from a year earlier to $103,900, according to a new report by Fidelity Investments, the nation's largest provider of 401(k) plans. The financial services firm handles more than 35 million retirement accounts in total.

The average individual retirement account balance also plunged 20% year over year to $104,000 in the fourth quarter of 2022.

"Given all the stresses in the world today, such as natural disasters and geo-political events, Americans continue to confront challenging times in our economy," Kevin Barry, president of workplace investing at Fidelity, said in a statement Thursday.

Still, the majority of retirement savers continue to contribute, Fidelity found. The average 401(k) contribution rate, including employer and employee contributions, mostly held steady at 13.7%, just below Fidelity's suggested savings rate of 15%.

And despite the ongoing inflationary pressure straining most households, only 16.7% of plan participants had a loan outstanding from their 401(k) at the end of the year, Fidelity said.

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Federal law allows workers to borrow up to 50% of their account balance, or $50,000, whichever is less. However many financial experts similarly advise against tapping a 401(k) before exhausting all other alternatives since you'll also be forfeiting the power of compound interest

A separate analysis from Vanguard also found that average 401(k) balances fell 20% in 2022 to $112,572, and hardship withdrawals ticked up slightly.

At the same time, many households also ate into their emergency savings over the course of 2022, other research shows.

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, according to a recent report by Bankrate.

"It's clear that the less-than-optimal economy, including historically high inflation coupled with rising interest rates, has taken a double-edged toll on Americans," said Mark Hamrick, senior economic analyst at Bankrate.

Many retirees expect to outlive their savings

The growing savings shortfall has many older Americans worried about their retirement security. Nearly half, or 48%, of retired Americans believe they'll outlive their savings, a separate report by Clever Real Estate found.

"Everyone is feeling pressure financially — there's a lot of uncertainty out there in the markets and the economy," said Mike Shamrell, Fidelity's vice president of thought leadership.

However, "a lot of people understand there's going to be ups and downs," he added. "Don't let short-term economic events derail your long-term retirement savings efforts."

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