Last year, the loss of the United States' defined contribution (DC) retirement pension, 401k, reached 20%. While living expenses increased due to soaring inflation, assets for retirement preparation shrank due to the contraction of the asset market.
On the 25th, major foreign media including Bloomberg cited a report from Fidelity Investments, the largest retirement pension manager in the U.S., stating that the average asset per 401k account last year was $103,900. This represents a 20.5% decrease from $130,700 a year earlier.
The average balance per 401k account at Vanguard Group also decreased by 20%. The loss rate of the equity funds actively managed by this company far exceeded 20%.
The loss of 401k, which serves as a solid retirement support for American retirees, was due to the decline in U.S. stocks centered on technology stocks last year. The S&P 500 index fell 19% last year, and the bond market also could not avoid weakness. As prices soared due to Russia's invasion of Ukraine, the U.S. Federal Reserve (Fed) launched aggressive tightening measures to curb inflation, delivering a direct blow to the asset market.
In particular, foreign media reported that although Americans struggled to increase savings amid soaring prices, assets for retirement preparation actually shrank.
As the high inflation made household finances tight, the rate of early withdrawals from retirement pensions also increased significantly. According to Vanguard, among about 5 million 401k participants last year, 2.8% withdrew retirement funds for reasons such as medical expenses and asset seizures. Before the COVID-19 pandemic, the rate was below 2%, rising to 2.1% in 2021, and nearly 3% last year as inflation soared.
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