Just under 35% of working-age Americans had 401(k) or similar employer-sponsored defined-contribution accounts in 2020, with a median balance of $30,000, and 18% had Individual Retirement Accounts or similar tax-advantaged individual retirement savings, with a median balance of $31,000, according to the U.S. Census.
Those accounts have had some bad months. At its worst, the benchmark S&P 500 stock index has dropped almost 25% in 2022 as the Fed began a series of rate increases to fight inflation, with much of the decline coming in a steep 9.3% plunge in September, the worst monthly loss since the US economy locked down in March 2020.
Still, shares at the beginning of the year had more than doubled from March 2020 lows. And investors had built up a lot of gains, so much so that the S&P 500 was still more than 10% ahead of its February 2020 pre-pandemic peak at the close of Wednesday’s trading.
While retirement savers often include bond investments to cushion the blow in a stock market downturn, this time bond market losses have also been severe, adding to the damage in 401(k) portfolios. The Fidelity US Bond Index Fund, a typical fund designed to correspond to the performance of the Bloomberg Barclays US Aggregate Bond Index, lost almost 15% in the first three quarters of the year.
How potent the GOP highlighting the market slide will be remains to be seen. Anxiety over retirement savings is ticking up even as Americans are growing more confident about the economy overall following a drop in gasoline prices and an easing of overall inflation.
The University of Michigan Consumer Sentiment Survey has risen for three months in a row. But when respondents to the survey are asked to rate the chance they will have adequate retirement savings, the average answer in September was 36.6%, down from 42.2% in January, a market peak when Americans were unusually confident of their wealth.
American investors have already been through a period of unusual market volatility, including a crash after coronavirus lockdowns that was quickly followed by record highs, and been exposed to years of advice to ignore short-term gyrations.
Ted Mitchell, a spokesman for Fidelity Investments, one of the largest providers of US retirement account services, with nearly $10 trillion under management, said the firm hasn’t seen a significant shift in retirement savers’ contribution rates or asset allocation.
The nonpartisan campaign advertising monitoring company AdImpact hasn’t detected any significant political TV commercials on retirement account losses. Chamberlain said she isn’t likely to suggest it as a theme for TV advertising but will probably encourage candidates to raise the issue in lower-profile direct mail ads in the coming weeks.
Republican pollster Robert Blizzard said concerns over retirement account losses and the stock market decline so far mostly work as “reinforcement” for voters already unhappy with Democrats over the economy.
“Voters are far more focused on short-term financial worries like affording groceries and supplies and less so on long-term investments,” Blizzard said. “Those frustrated with the current administration point to the bear market as another example of their own economic anxieties.”
--With assistance from Jordan Fabian.
This article was provided by Bloomberg News.