In 2023, American workers participating in 401(k) plans continued to save at unprecedented rates, according to Vanguard’s annual report, “How America Saves.”
While the overall trends in savings and investment were positive, there were signs of financial strain among some participants. The report notes a 12 percent increase in loan usage from 2022. More concerning was the rise in hardship withdrawals. Nearly four percent of non-retirees took money out in 2023 for emergencies.
Despite strong savings habits, some workers face financial challenges that necessitate tapping into their retirement funds prematurely.
Record High Account Balances
In 2023, average 401(k) account balances rose 19%, mainly due to market performance. By the end of the year, the average participant account balance was $134,128. The median account balance reached $35,286 — 29% more than the end of 2022.
The stock markets saw gains of 25%, while bond markets rose 5% on the back of strong economic growth, resulting in high 401(k) balances.
Additionally, …