Vanguard’s latest How America Saves preview offers a glimpse of the economic attitudes among Americans today, finding that as inflation and unemployment numbers reduced, so did workers’ market fears.
Vanguard’s latest report shows that as inflation lowered and unemployment stabilized, participant retirement plans have remained largely unaffected. Account balance averages grew by 19%, with an average balance of $134,128 as of year-end 2023, and 43% of participants increased their deferral rate, either on their own or as part of automatic enrollment.
Even with volatile markets in 2023, only 5% of nonadvised participants traded. At the end of 2023, equity and bond markets both ended with positive gains of 25% and 5%, respectively, Vanguard’s research adds.
Loan issuances and hardship withdrawals still increased last year, potentially indicating that some households continued to face financial stress. Loan usage rose by 12% during 2023, however, continues to remain below pre-pandemic levels and is nearly 10% lower than the loan initiation rate of six years ago, Vanguard reported.
On the other hand, hardship withdrawals grew slightly at 3.6% of total participants, up from 2.8% in 2022.
Despite an up in numbers, 96% of participants did not take a withdrawal in 2023, Vanguard reported. This data underscores that participants are generally resilient and maintain a long-term approach to retirement saving, even during volatile and uncertain economic times.
Still room to grow
Even with this progress, Vanguard urges financial professionals and plan sponsor clients to consider possible future improvements. For example, plan sponsors who have not implemented an automatic enrollment feature should consider doing so. For this with the feature, “how quickly is the plan designed to get participants to a 12% to 15% total savings rate on its own?” Vanguard asks readers.
Offering advice tools to better service participants can help them financially succeed, adds the firm. Between retirement, student loans, health care savings, emergency savings accounts, and other competing priorities, “plan sponsors can help support their employees with a cost-efficient, high-quality advice offer as well as a platform that provides guidance on their financial well-being—two valuable services that meet participants where they are on their financial journey and help provide personalized solutions for their goals,” Vanguard concludes.
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Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.