Employees with workplace retirement savings accounts saw their account balances shrivel 20% on average in 2022, according to a preview of Vanguard's upcoming edition of its annual How America Saves report.
At the end of 2022, the average account balance swooned to $112,572 from $141,542 in 2021.
While half of the 5 million plan participants surveyed made no change to their contribution rates, 9% decreased their contributions, higher than in the previous three years. Fewer participants increased contributions voluntarily, with only 15% doing so, down from 17% the year before. A small number, 2%, stopped making contributions altogether, in line with the three previous years.
Nevertheless, Vanguard put a positive spin on the wreckage caused by last year's ferocious bear market, noting that 39% increased their deferral rate either on their own (15%) or as part of an automatic annual increase (24%).
"While average account balances decreased by 20% in 2022, primarily driven by negative market performance, participant behaviors mostly remained positive," Vanguard said in the report preview.
Vanguard also highlighted participants' increasing use of "professionally managed allocations" whereby participants invest their entire account balance in a single target-date, target-risk or traditional balanced fund, or in a managed account advisory service.
At the end of 2022, 66% of participants were invested in a professionally managed allocation, up from 64% in 2021 and up from 36% in 2012. Of those, 7% were in a managed account.
Vanguard cheered the growing use of professionally managed allocations, saying it contributed to a reduction in portfolio construction errors.
"The fraction of participants holding broadly diversified portfolios has steadily risen over the past decade and stood at 79% at the end of the year," the report said.
The new edition of How America Saves will be available in June. It analyzes retirement plan data from nearly 5 million defined contribution plan participants across Vanguard's record-keeping business.
