Retirement accounts surged on strong 2023 markets: Vanguard

investmentnews.com:

Despite a year of uncertainties that included volatile markets and shifting economic policies, American workers have largely stuck to their long-term retirement goals by maintaining steady saving habits, according to new Vanguard research.

In a preview of its How America Saves report, which analyzed data on nearly 5 million defined-contribution plan participants in 2023, the indexing giant found a notable 19 percent increase in average account balances, primarily driven by positive market performance.

Despite a complex economic environment marked by the highest mortgage rates in over two decades and record-high household debt, the equity and bond markets concluded 2023 with gains of 25 percent and 5 percent, respectively.

Against that backdrop, the report found only 5 percent of non-advised participants engaged in trading activities – a record low for the Vanguard study.

Positive market performance helped drive a significant uptick in account balances, which reached $134,128 at year-end 2023. The median balance also surged by 29 percent over the previous year to $35,286.

Professionally managed allocations also held strong, with 66 percent of participants invested through target-date funds or other vehicles.

“Participants with [professionally managed allocations] have their entire account balance invested either in a single target-date, target-risk, or traditional balanced fund, or in a managed account advisory service,” the report said.

A record 64 percent of all contributions were directed into target-date funds, suggesting a growing trust in these investment vehicles.

Automatic enrollment in retirement plans also saw a steady increase, with 59 percent of Vanguard plans adopting the feature by the end of 2023. Larger