How America Saves
One of my favorite times of year is when Vanguard, the large financial firm famous on tik tok for their low cost index funds, publishes a report about how America saves.
I don’t know how many people read it or even know that it exists. Honestly, I don’t know that’d I’d even recommend checking it out but maybe you’d find it interesting.
Since I explore all sorts of data regarding retirement savings with the aim of seeing what we are doing to ensure the future I always love to crack open the 114 page pdf and see what this year’s version holds. In short, Vanguard analyzes the savings trends of those that contribute to Vanguard accounts. Since they hold many data points and have so many account holders, the data is pretty good but the story is telling.
The one page that I have been puzzled by for some time is found in two charts on page 50. Now, I know more than anyone that there are many variables at play when it comes to the market, participation, rollovers and more. Yet this one page has me stumped and I share my curiosity with you and see if you have any ideas.
So what’s on page 50? Well, it is a 10 year look at average account balances at Vanguard, median account balances at Vanguard and then what percent of Vanguard accounts are at different funding levels like 28% have less than $10k and 15% have more than $250k.
What’s the thing that I can’t make sense of? The numbers have not changed in 10 years and it goes even further back than that when you look at earlier reports. I get that you might be thinking, “ok, so what?” But here is what I am trying to figure out.
If the market has been on a really good ride up since the 2008 crisis, wouldn’t we see uptick in account values or a steady move of accounts into higher and higher levels.
Take the median. From $29k in 2014 to $34k in 2023. That is a 1.6% growth over 10 years if no contributions were made to the accounts. If participants contributed $100/month for that decade these numbers perhaps indicate an overall loss.
At the risk of sounding conspiratorial I know that more participants with new accounts would weight the bottom while some move forward and keep the weighted averages within some range. Yet I would think that one of the best runs in market history would reveal growth in simple charts like the ones vanguard provides. When I don’t see what I believe should be obvious, I get curious.
Maybe you are too. Perhaps you are thinking about your accounts? Maybe a good question to consider is how much of my account like a 401(k) or Roth IRA is my contribution versus growth? Always important to consider.
One thing these charts do reveal is an eerie parallel to the general data on retirement savings. Around $30k is the average account balance in the US. The stats on average can be deceiving. A person with $10k and a person with $250k have an average of $130k but we know these are far from the same situations.
I love reports like Vanguard’s. If you run across different ones I’d love to see them.
Here is the link to where you can download your very own PDF.
https://institutional.vanguard.com/insights-and-research/report/how-america-saves.html
As always, if you come across a financially related article you’d like to send my way please do!
Best place to send them is to me.
More next time!
J