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HomeMarketAmericans Stuck With 401(k)s, Even During 2022's Rough Market

Americans Stuck With 401(k)s, Even During 2022’s Rough Market

Retirement savers actually heeded advice to ‘stay the course’ during the bumpy markets of 2022.

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The vast majority of retirement savers weathered a stormy 2022 without tweaking their investments or bailing out of the market, new numbers show. 

Only 6% of investors in self-directed retirement accounts traded last year, the lowest level in more than two decades, according to Vanguard. This despite the worst market since 2008: In 2022, the S&P’s 500 lost nearly 20%, U.S. bonds dropped about 13%, and most target-date funds, which adjust their mix of stock and bonds as the owner approaches retirement, fell somewhere in between. 

“It was very reaffirming and showed that, by and large, participants did the right thing when it might have been emotionally difficult to do the right thing,” said Dave Stinnett, head of strategic retirement consulting at Vanguard, which last week released a preview of its ‘How America Saves’ report that tracks participant behavior in retirement accounts that Vanguard administers.

Over half of all 401(k) plan participants are invested in target-date funds, which gradually get more conservative as the account holder approaches retirement. The average 2060 target-date fund (2060 denotes the expected retirement year) lost 18% in 2022, while the average 2030 target-date fund for those within 10 years of retirement fell 16%, according to Morningstar Direct. While it might be tempting to sit out these kinds of losses in cash, investors who exit their investments tend to stay on the sidelines too long and miss much of the recovery.

It wasn’t just restraint that helped investors stay the course during a dismal year. Inertia also played a role, Stinnett said. Retirement plans are designed to make it easy for investors to enroll and stay enrolled. Many workers are automatically enrolled into their 401(k), after which payroll deductions automatically contribute to their account on a regular schedule. Most plans that automatically enroll workers also employ an “auto-escalation” feature that increases participants’ contribution rate each year. The Secure 2.0 retirement legislation that passed at the end of 2022 will require most new 401(k) plans to employ auto-escalation. 

Last year, nearly 40% of all retirement savers increased their contribution rate, according to Vanguard. Of those, 15% proactively increased it themselves, while 24% saw it rise as a result of auto-escalation, Stinnett said.

While the set-it-and-forget-it nature of target-date funds helps savers stay on track, these one-size-fits-all vehicles might not be best suited for everyone. In particular, those approaching retirement might want to look at their target-date fund in the context of their overall investments and make adjustments as needed.

Write to Elizabeth O’Brien at


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