Three Year Winning Streak for 401(k) Participants Could Be in Jeopardy

July 27, 2022

After three straight years of positive annual returns, 401(k) participants face a nearly 18% decline as we hit the halfway point of 2022.

Just two years ago, as the pandemic took hold across the globe, 401(k) participants watched their account balances get walloped. In the first quarter of 2020, the Mid Atlantic Trust Company 401(k) Composite Benchmark showed a 16.12% decline for that quarter alone for the hypothetical 401(k) participant. But, of course, from that low point, the markets came roaring back with solid gains achieved throughout the remainder of 2020 to finish the year at +14.85%. Tack on gains of over 14% for 2021 and 401(k) participants rode one of the strongest two-year market rallies in history. Comparison with Major Indices Q2 Table Sometimes, of course, as quickly as the market “giveth,” the market “taketh away.” With the closing of the books on the first half of 2022 at the end of June, 2020, we closed out the worst first-half performance in global markets in decades as fears grew that the central banks would push economies into a recession with their fight against inflation, ongoing supply-chain issues, and the Russia-Ukraine war. For the second quarter, the S&P 500 fell more than 16% – its biggest one-quarter fall since March 202, the Dow Jones Industrial Average staged its worst first-half performance since 1962, losing 11.3%, and the Nasdaq suffered its biggest quarterly drop since 2008, losing 22.4%. Meanwhile, the Mid Atlantic Trust Company 401(k) Composite Benchmark also took a hit in quarter two, with a -12.96% return, putting it down -17.99% year to date, but in better shape than the Nasdaq and S&P 500 indices.

ABOUT THE MID ATLANTIC 401(k) BENCHMARK Mid Atlantic Trust Company is a leading financial services organization that provides a wide array of brokerage, advisory, and trust services to a diverse national client base of financial advisors and institutions, asset managers, and benefits administrators through its various subsidiary companies.  Because we provide these services, Mid Atlantic Trust Company has plan investment data on over 100,000 401(k) plans representing approximately $120 billion in assets. In response to requests from our institutional clients, we have created the Mid Atlantic Trust Company 401(k) Composite Benchmark. Using data from plans serviced by Mid Atlantic Trust Company with assets of at least $100,000 at the beginning and ending of the month, the Mid Atlantic Trust Company 401(k) Composite Benchmark is designed to reflect the portfolio performance across 401(k) plans serviced, in any capacity, by Mid Atlantic. See the “Methodology” section of this report for details on how the composite benchmark is calculated.     * For the hypothetical participant balances, we used a starting balance based on the average 401(k) participant balance provided by the Investment Company Institute for the Year of the starting balance. In our calculation, we assumed a starting annual salary of $50,000, a combined employee/employer 9% annual contribution rate, and a 3% annual salary increase and applied the monthly rate of return of the Benchmark.