401k account balances shrinking

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The average balance in employer-sponsored savings plans last year was $112,572, well below the $141,542 recorded in 2021.

That’s according to the latest annual report, “How America Saves,” from investment firm Vanguard, which serves as record keeper for defined contribution plans that, combined, have nearly 5 million participants with a median age of 43. Such plans include 401(k)s and 403(b)s, as well as a much smaller universe of plans that employers simply put money into for employees and then employees direct how that money is invested.

“Vanguard participants’ average account balances decreased by 20% since year-end 2021, driven primarily by the decrease in equity and bond markets over the year,” according to the report.

The numbers look worse if you consider the median balance, which was just $27,376 last year, down from $35,345 in 2021. The median in some ways is a truer read on the state of employees’ retirement savings since it is the middle point — meaning half of accounts have higher balances, and half have lower ones.

Some participants tapped their retirement savings early — either through a withdrawal or a loan. Vanguard found that in plans where they had the option, 2.8% of participants made hardship withdrawals, the highest since 2018. Given last year’s economic headwinds, “the increase … may signal that some households faced additional financial stress,” Vanguard said, noting that about a third of hardship withdrawals were to avoid home foreclosure or eviction, and roughly another third were due to medical expenses.

Meanwhile, another 3.6% of participants made non-hardship withdrawals. And 12% borrowed money — an average of $10,500 — from their accounts.
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https://www.cnn.com/2023/06/15/success/401k-savings-participant-behavior-vanguard/index.html

(Don't concern yourself, these are just side effects)

 

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In the latest sign of an economy edging deeper into troubled waters, more Americans are raiding their 401(k) retirement accounts to cover basic living costs, according to data released by Fidelity Investments on Monday.

"Americans outside the wealthiest quintile have run out of extra savings generated early in the pandemic and now have less cash on hand than they did when the pandemic began," notes Bloomberg's Alexandre Tanzi, citing Fed data.

According to Fidelity, 2.3% took a hardship withdrawal in the third quarter, up significantly from the 1.8% rate observed in the same quarter of 2022. The top two reasons given for the third-quarter hardship withdrawals: avoiding foreclosure/eviction, and medical expenses.
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Inflation-Battered Americans Raiding 401k's To Pay Mortgages And Rent | ZeroHedge

ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero

www.zerohedge.com

So the hardship withdrawals came down a bit from earlier in the year, but they are still elevated over last year's levels.

 

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[CopperSilverGold]

The average person is barely getting by so that's probably 95% or more of the withdrawals or loans. The rest could be people waking up at how rigged everything is and taking what they can before the walls come tumbling down.

 

[pmbug]

I suspect the vast majority is folks trying to get by or pay off credit catd debts.