Retirement assets per U.S. household peaked at around $350,000 during the stock market's pandemic highs in late 2021, marking an impressive rebound from the early pandemic low of $278,000, but they fell again through late 2022 to settle at approximately $305,000.
This is according to a new analysis published by SmartAsset, which shows retirement assets held by pensions and within 401(k) plans and individual retirement accounts have experienced severe turbulence over the past three years — causing a significant degree of pain for older workers and recent retirees.
According to the report, the real value of Americans' retirement savings has plummeted thanks to the market volatility and the persistent bite of high inflation. This is a troublesome development for the wealthy, the report notes, and a severe challenge for older Americans of more modest means.
All in all, retirement holdings have increased by just about 2% since the first COVID lockdowns in early 2020, but prices shot up by a cumulative 16% between the end of 2019 and the close of the third quarter of 2022.
According to SmartAsset experts, this all goes to show that average retirements savings "pale in comparison to the massive cost of living increases in recent years." They say Americans have been on a retirement readiness rollercoaster, and the ride isn't set to stop anytime soon.
A Real Rollercoaster
As the SmartAsset report retells, the 2020 lockdowns created the largest quarterly drop in American net worth in some 70 years. During the first quarter of the year, more than $5.8 trillion was wiped from American households' net worth.
However, as the report notes, account values bounced back in a big way. Specifically, from the beginning of 2020 to the end of 2022, nearly $31 trillion was added to U.S. households' and U.S. nonprofits' net worth.
As for the general stock market, the report points out that "wild fluctuations" have taken place in response to major policy pivots experienced in the prior three years — particularly the initial COVID lockdowns and later the Federal Reserve's race to increase interest rates.
Direct and indirect holdings of corporate equity owned by households and nonprofits dropped by a whopping $7.7 trillion in Q1 2020, the report shows. While this was quickly recovered (and then some), another $7.9 trillion drop in corporate equity occurred in Q2 2022 when the Federal Reserve started increasing interest rates, the report states.
Overall, corporate equity owned by households and nonprofits increased by a net $5.2 trillion between the beginning of 2020 and end of 2022, according to SmartAsset.
