Yet another report out today shows 401(k) accounts generally took a 20% hit in 2022, although it could have been worse if not for a subtle recovery in Q4.
The latest findings from Schwab’s Q4 SDBA Indicators Report, an industry-leading benchmark on retirement plan participant investment activity within self-directed brokerage accounts (SDBAs), shows the average account balance across all participant accounts finished at $280,099 for the fourth quarter ending December 31, up by 2.45% from the third quarter of 2022 but down 20.6% year-over-year.
The Q4 increase reflects growth in the markets toward the end of the year, but year-over-year returns remained negative for the fourth consecutive quarter, consistent with the market overall.
The 20% decline mirrors recent year-end statistics from other big recordkeepers. Fidelity’s 2022 Retirement Analysis revealed the average 401(k) balance at the recordkeeper fell by just over 20% over the course of last year, to $103,900, down from $130,700 at the end of 2021. And then there was Vanguard’s recent announcement that the average participant account balance there was $112,572 at the end of 2022, also down 20% from the close of 2021.
The Schwab report also illustrated the significant disparity between retirement savings in advised accounts compared to non-advised accounts. Advised accounts at Schwab held $459,438 compared to non-advised accounts at $236,206.
The report also found:
• Gen X had the most advised accounts (50%), followed by Baby Boomers (30%) and Millennials (16%).
• Gen X made up 46.2% of SDBA participants, followed by Boomers (28.7%) and Millennials (19.5%).
• Boomers had the highest SDBA balances at an average of $453,554, followed by Gen X at $252,171 and Millennials at $85,446.
• On average, participants held 12.6 positions in their SDBAs at the end of Q4 2022, similar to the previous year and the previous quarter.
Allocation trends
Overall, participant holdings were similar to the third quarter.
- Equities: Equities remained the largest holding at 31.3%. The largest equity sector holding was Information Technology at 28.7%. The top equity holdings remained Apple (11.9%), Tesla (4.98%), Amazon (3.9%) and Microsoft (3.3%). Berkshire Hathaway held 2.3%.
- Mutual funds: Mutual funds were the second largest holding at 29.4%, with the largest allocation going to large-cap stock funds at 32.7%. They were followed by taxable bond (18.3%) and international (14.1%) funds.
- ETFs: ETFs held 22.1% of participant assets. Among ETFs, investors continued to allocate the most dollars to U.S. equity (51.7%), followed by fixed income (13.8%), international equity (13.1%) and sector (11.3%) ETFs.
SDBAs are brokerage accounts within retirement plans, including 401(k)s and other types of retirement plans, that participants can use to invest retirement savings in individual stocks and bonds, as well as exchange-traded funds (ETFs), mutual funds and other securities that are not part of their retirement plan’s core investment offerings.
Schwab’s SDBA Indicators Report includes data collected from approximately 187,000 retirement plan participants who currently have balances between $5,000 and $10 million in their Schwab Personal Choice Retirement Account. Data is extracted quarterly on all accounts that are open as of quarter-end and meet the balance criteria.
SEE ALSO:
• 401(k) Balances Dropped 20% in 2022 at Fidelity, But Increased in Q4
• Participants Increased Savings Despite Uncertainty in 2022
• Charles Schwab Updates Target Date Solutions for 2023
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
