How’s your 401k doing after 2022? For retirement-age Americans, not so well

In the world of retirement savings, younger investors have largely recovered from the market turmoil of 2022. Older investors have not.

By the midpoint of 2023, the average millennial saver had made up all of their losses from the previous year, according to data from Fidelity Investments. The average 401(k) balance for millennials stood at $48,300 through June 30, up from $48,000 at the close of 2021.

Baby boomers, by contrast, remain underwater. The average 401(k) account for boomers held $220,900 at the end of June, compared with $249,700 at the end of 2021.

Last year “was an extremely difficult year for investors,” said Catherine Collinson, CEO and president of the nonprofit Transamerica Institute and Transamerica Center for Retirement Studies.

Stocks have moved plenty in 2023, if not necessarily up. The Dow Jones Industrial Average is trading in the 33,000 range, near where it started the year.

“There was supposed to be a rally,” said Lili Vasileff, a certified financial planner in Greenwich, Connecticut. “It hasn’t happened. If anything, it’s fizzled.”

But older investors have faced a unique challenge this year: recovering from last year, when both stocks and bonds took a bath.

The worst year ever for stocks and bonds?

Stocks shed 18.6% of their value in 2022, as measured by the S&P 500, a loss that swells to 25% after adjusting for inflation, according to a NASDAQ analysis.

Bonds lost 13.7% of their value, going by the Vanguard Total Bond Market Index. Inflation pushes that figure to 20%, the worst bond return in 97 years, according to NASDAQ.

A quick primer: Companies and governments issue bonds to raise money from investors. Bonds reward buyers with interest payments. The value of a bond rises and falls with its appeal to investors. If the market price goes up, the yield in interest goes down, and vice-versa. Returns on bond funds, such as the Vanguard index fund, depend on both the market price of the bonds in the fund and interest income payments.

Bonds serve as a hedge against stocks. Bond values are comparatively stable, and they tend to rise when stocks fall.

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