Retirement Confidence, 401(k) Balances Decline

Stressed Over MoneyBoth retirement confidence and 401(k) balances are on the decline.  Recent reports on retirement savings in America paint a worrisome picture of financial security for future retirees.  Vanguard’s latest study reveals a two-year decline in 401(k) and 403(b) balances, while another survey from the Federal Reserve shows that fewer than one in three non-retired Americans (31%) believe their retirement savings are on track, down from 40% in 2021 and the lowest level since 2017.  This combination of dwindling retirement account balances and eroding confidence raises concerns about Americans’ long-term financial stability as they approach retirement.

Vanguard: A Grim Outlook for 401(k) Balances

According to the Vanguard report, cited by, 401(k) and 403(b) balances have experienced a significant decline over the past two years.  Overall, the average 401(k) and 403(b) plan account balance has fallen from $141,542 in 2021 to $112,572 in 2023.  That’s about a 20% loss over a two-year period; alarming to be sure, given that most Americans are already behind on their retirement savings.  Several factors contributed to this decline, including market volatility, insufficient contribution rates, and limited investment diversification.

Americans’ Retirement Confidence Lagging

A separate survey from the Federal Reserve, cited by MarketWatch, highlights a growing lack of confidence among Americans when it comes to having enough retirement savings.  Several factors contributed to this trend:

  • Uncertain economic conditions, such as recessions, market volatility, and rising living costs make it difficult to save for retirement.  Add to that low wages, high living expenses, and competing financial obligations, and it’s no wonder Americans are feeling less than confident about their futures.  Inadequate savings make it challenging to envision a secure retirement, leading to concerns about financial readiness.
  • A lack of financial literacy makes it challenging for many adults to make informed decisions about their retirement savings.  Without proper guidance and education, they may not fully understand how to manage their day-to-day financial obligations while also planning for the future.
  • Traditional pension plans have largely been replaced by self-funded retirement accounts like 401(k)s.  This shift means Americans are mostly on their own when it comes to saving and investing wisely for retirement.  Many find themselves ill-prepared to navigate the complexities of investment decisions, causing them to question the adequacy of their savings.

Potential Action Steps

Americans’ declining 401(k) balances and waning retirement confidence bring to light a need for individuals, policymakers, and financial institutions to take action.  Some potential solutions include:

  • Better financial education: Promoting financial literacy and wellness programs in schools and workplaces can help more Americans gain access to the knowledge and skills they need to make sound financial decisions, including planning for retirement.
  • Increasing contribution rates: Higher contribution rates to retirement accounts, either voluntarily or through policy changes, would help give savings a boost. Employers can play a role by offering matching contributions and automatic enrollment to encourage employees to save more.
  • Diversified investment strategies: A diversified investment strategy is designed to help manage risk and improve long-term returns. Providing access to professional financial advice and guidance can help Americans make more informed investment decisions while boosting their overall retirement confidence.
  • Policy reform: Policymakers should consider additional measures, like SECURE 2.0, that support retirement savings, such as expanding access to retirement plans and exploring innovative retirement plan design solutions.

Declining 401(k) balances and a lack of retirement confidence signal that there’s more work to do when it comes to helping Americans achieve retirement security. Addressing these challenges requires collaboration between employers, policymakers, and financial services providers. Fostering financial education, promoting higher contribution rates, diversifying investment strategies, and implementing supportive policies can help Americans save more and increase their retirement readiness.


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