VALLEY FORGE, Penn.–The average balance in employer-sponsored savings plans in 2022 was $112,572, well below the $141,542 recorded in 2021, according to the latest “How America Saves” report from investment firm Vanguard.
Vanguard based its findings on data from the nearly five-million participants in its defined contribution plans.
"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.
According to an analysis by CNN Business, the numbers look worse when considering the median balance, which was just $27,376 last year, down from $35,345 in 2021.
A ‘Truer Read’
“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,” CNN Business reported.
The data show some participants tapped their retirement savings early — either through a withdrawal or a loan, with the report noting Vanguard found that in plans where they had the option, 2.8% of participants made hardship withdrawals, the highest since 2018.
Trying to Avoid Foreclosure
Vanguard found that about a third of hardship withdrawals were to avoid home foreclosure or eviction, and roughly another third were due to medical expenses.
There is a bright side, the analysis shows in that a lot of employers' defined contribution plans now have features that make it easier for employees to save more, CNN Business said, citing Vanguard data showing that 95% of employers’ plans make contributions to their employees' accounts. More than half offer a matching contribution — with the most typical match being 50 cents for every dollar an employee saves up to 6% of their pay.
But more than a third of employers (36%) offer not only a matching contribution but also a nonmatching contribution, meaning they put money into an account on behalf of eligible employees whether or not they are saving themselves. These often take the form of fixed- or variable-rate profit-sharing payments.
Additional Findings
Other data from the report show, according to Vanguard:
- Vanguard found that the average employee deferral rate was 7.4%, while the median was 6.4%. Just under a quarter of participants save more than 10% of their salary, Vanguard said.
- Including what employers kick in, the average total contribution rate was 11.3%. The median was 10.6%.
- Among participants who save below the recommended 12% to 15% range, Vanguard found that a fifth of them only need to boost their deferral rate by 1% to 3% of their pay to hit that target range.
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