David Lazarus reports for the KTLA 5 News at 1 on Nov. 17, 2022.

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The year 2020 was a tough one for everyone, and that included retirement savers in the United States. According to a recent study, the average 401k account balance fell by 23% in just one year. This was largely due to the economic effects of the COVID-19 pandemic and the subsequent market volatility.

The study, conducted by a financial services company, looked at the balances of over 2.4 million 401K accounts from the end of 2019 to the end of 2020. On average, the balance in these accounts fell from $112,300 to $86,500, a decrease of almost $26,000. This is the largest annual drop since the financial crisis of 2008.

There were several factors that contributed to this decline. First and foremost was the pandemic and its effect on the economy. As businesses closed and many workers lost their jobs or had their hours reduced, the market responded with steep declines. The S&P 500 Index, a benchmark for the performance of many stocks, fell 34% from its peak in February to its low in March.

In addition to the pandemic, other events also played a role in the decline of 401K balances. The US-China trade war, tensions with Iran, and the upcoming presidential election all created uncertainty and volatility in the markets. These factors made it difficult for investors to predict how their investments would perform.

So what does this mean for retirement savers? It’s important to remember that a 401k account is a long-term investment. While the drop in value may be concerning, it’s not necessarily a reason to panic. In fact, experts advise against making major changes to your investments based on short-term market fluctuations.

Instead, it’s a good idea to focus on the factors that are within your control. This includes contributing as much as you can to your 401k account, taking advantage of any employer matching contributions, and diversifying your investments. A well-constructed portfolio will be better equipped to weather market turbulence than one that is overly concentrated in a single stock or sector.

Retirement savers should also keep in mind that the market has a history of recovering from downturns. While past performance is no guarantee of future results, over the long term, stocks have tended to trend upward. In fact, some investors see market downturns as opportunities to buy stocks at a discount.

In conclusion, the news that the average 401K balance fell 23% in one year may be alarming, but it’s important to keep things in perspective. This was largely a result of external factors that were beyond the control of individual investors. By continuing to save, diversifying investments, and maintaining a long-term perspective, retirement savers can build a solid foundation for a secure financial future.