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Retirement savers lose over $3 trillion in stock market retreat

 2 years ago
source link: https://finance.yahoo.com/news/retirement-savers-lose-stock-market-201508667.html?_tsrc=fin-notif
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Retirement accounts pummeled as a result of market volatility
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Retirement savers lose over $3 trillion in stock market retreat

Kerry Hannon
·Senior Columnist
Fri, June 24, 2022, 5:15 AM·5 min read

As stocks somersault this year, trillions of dollars have been scrubbed from Americans’ retirement savings.

This year, the S&P 500 has slumped over 20%, the Dow Jones Industrial Average has fallen close to 16%, and the Nasdaq Composite has dropped more than 28%. As a result, Americans lost $1.4 trillion in their 401(k) accounts and another $2 trillion in IRAs, according to Alicia Munnell, director of the Center for Retirement Research at Boston College.

While the losses sting especially after the stellar run-up in 2021, Munnell says most Americans still have enough time to recover before they tap those accounts.

“I personally feel like I never expected the gains in 2021… In some ways we've just lost those unexpected gains and puts us back out to where we were before all this excitement started,” she told Yahoo Money. “In that sense, it's not so bad.”

A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 13, 2022. REUTERS/Brendan McDermid
A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 13, 2022. REUTERS/Brendan McDermid

Last year, nearly two-thirds of all 401(k) money that it manages was held in stocks, according to mutual fund company Vanguard’s new report, “How America Saves 2022.”

Holding gobs of equities in retirement accounts was sweet while it lasted. The S&P 500 climbed 26.89% in 2021. The Dow and Nasdaq also scored gains of 18.73% and 21.39% for the year, respectively.

The result: average total and personal returns for retirement plan participants were 14.6% and 13.6%, respectively, for the one-year period ended December 31, 2021, according to the Vanguard report.

But for somebody in the 45-to-54 age group, whose median account balance was roughly $61,500 last year, “assuming that 72% of that's in equities, and equities are down about 20% that means that they would have lost about $8,860 so far this year,” according to Munnell’s analysis of the Vanguard data.

How much stock is too much?

In 2021, retirement plan asset allocation for those under age 34 consisted of 88% in stocks; for savers ages 50 to 54 that dropped to 71%; for near retirees ages 60 to 64, it was 57%; and for those over 70, it was 43%.


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