it is always interesting to look at vanguard’s most recent edition of “how america saves” and it is particularly interesting to get the numbers for 2022 – not a good year for the stock market indeed the news isn’t good for 2022 more importantly the longerrun trends – despite a great expansion in autoenrollment – are not very encouraging either vanguard reports a substantial decline between 2021 and 2022 in both median and mean 401k balances the big difference between the median and the average is due to a small number of accounts that have really big balances average balances are more typical of longtenured more affluent participants while the median balance represents the typical participant mean balances dropped from 141500 to 112600 and median balances from 35300 to 27400 – declines of 20 and 23 respectively from 2021 vanguard attributes the decline primarily to a negative return on plan assets in 2022 of negative 158 plus a changing mix of participants but low balances are not just a shortrun problem balances generally are puny consider the holdings of those approaching retirement – ages 55 to 64 as one would expect these balances are much larger than those for the full participant population but still the median is 71000 which means that half of participants have less than this amount and half more see figure 1 moreover vanguard tends to administer larger plans so the plans are better designed than average and participants have higher incomes in other words it presents the best face of the 401k system of course these individual 401k balances do not tell the whole story about retirement saving first when participants change jobs their 401k accounts may remain with their old employer so individuals may have more than one 401k account second 401k balances may be rolled over to an ira and financial services companies cannot track combined 401kira holdings third by necessity balances are provided on an individual rather than a household basis for all these reasons we are looking forward to data from the federal reserve’s 2022 survey of consumer finances which will be released in the fall but assume that the median 401kira holdings for households approaching retirement turn out to be twice the vanguard number for individual participants – a ratio consistent with earlier years that would mean that a household 5564 with a 401k would have total 401kira balances of 142000 if a couple uses its 142000 to buy a jointandsurvivor annuity they will receive – even with today’s high interest rates – about 745 per month since this amount is not indexed for inflation its purchasing power will decline over time moreover this 745 is likely to be the only source of retirement income to supplement social security because the typical household holds virtually no financial assets outside of its 401k moreover households with a 401k plan are the lucky ones only about half of households in the middle third of the income distribution have such a plan the bottom line is that our private sector retirement system works well for the top third of households provides a little for the middle third and offers virtually nothing for the bottom third we should be able to do better than that