A new report released by Vanguard shows the average account balance in retirement contribution plans dropped by 20 percent from 2021 to 2022.
Vanguard’s report found that the average account balance for its defined contribution plans was $112,572 in 2022, down nearly $30,000 from the average in 2021. The report noted that 1 in 3 account holders had a balance of less than $10,000, about 25 percent had a balance of more than $100,000 and 12 percent had a balance of $250,000 or more.
The report attributed the drop in average balances to “market performance and an evolving participant base.” The median account balance dropped by 8 percent among those who had an account in December 2021 and December 2022.
“Account balances are widely available on statements and websites and are often cited as participants’ primary tool for monitoring investment results,” the report stated. “Because of ongoing contributions, account balances will appear to be less negatively impacted during falling markets. This ‘contribution effect’ may mask the psychological impact of falling stock prices on participants.”
A participant’s demographics, including age, gender and income, can also impact how their account balances were impacted.
“Not only does income, on average, tend to rise somewhat with age, making saving more affordable, but older participants generally save at higher rates. Also, the longer an employee’s tenure with a firm, the more likely they are to earn a higher salary, participate in the plan, and contribute at higher levels,” the report states.
The report noted that women tend to make lower incomes than men do, which could explain why men’s average account balances were 43 percent higher than women’s in 2022, even though women tend to save more at “each respective income level.” The average account balance for a woman was about $95,000 in 2022, while the average account balance for a man was nearly $137,000.