Average 401(k) balances dropped 20% in 2022 — but few investors flinched, Vanguard research shows

There’s no question 2022 was a rough year for investors.

With record-high inflation, economic uncertainty and aggressive interest rate hikes from the Federal Reserve to combat rising prices, stocks took a beating. All three of the major indexes had their worst year since 2008: The S&P 500 Index dropped 19.4%, the Dow Jones Industrial Average sank 8.8% and the Nasdaq Composite Index lost 33.1%.

Yet most 401(k) plan participants rode out the storm — and many increased their contributions, according to a new analysis from Vanguard that’s a preview of its annual How America Saves report.

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As of year-end 2022, the average participant account balance at Vanguard was $112,572, down 20% from a year earlier, the research shows. The median balance — half were above, half below — was $27,376 at the end of the year, a 23% decrease.

At the same time, though, 39% of participants’ deferral rate — the portion of their paycheck directed to their 401(k) account — climbed higher, compared with 9% of investors who decreased their contributions. While many initiated the increase on their own, more than half of the boosts came from the plan’s yearly automatic escalation.

“Despite economic headwinds, we were pleased to see that participant behavior in retirement plans remained in line with previous years, and most participants continued to maintain a long-term view,” said Dave Stinnett, head of strategic retirement consulting at Vanguard.

Additionally, just 2% of the investors in target-date funds made any exchanges (59% of participants are in those funds). Among those not in target-date funds or other professionally managed allocations, only 6% did any trading, the lowest point in 20 years, according to…