Retirement accounts fell more than 20% in 2022

2022 wasn't a good year for the stock market, which means it was a rough ride for those saving for retirement.

Fidelity Investments — a manager of retirement accounts and a Marketplace underwriter — reported that the average 401(k) account lost 21% of its value last year. The average individual retirement account — or IRA — fell by 23%.

Balances rebounded a bit in the fourth quarter, but not enough to make up for steep losses earlier in the year. Average account balances — for both 401(k)s and IRAs — fell to around $104,000 in 2022, according to Fidelity Investments.

That low level of retirement savings, "It'll scare the daylights out of you," said Greg McBride, a financial analyst at Bankrate.com. "Americans generally are under-saved—for not just emergencies, but retirement as well," he explained.

To cope with emergencies, people often raid their retirement funds.

"There was an uptick in loans and hardship withdrawals from retirement plans," McBride said. "With inflation moving to 40-year highs, that has shredded a lot of household budgets."

But these early withdrawals are costly, said Robert Frick at Navy Federal Credit Union.

"Penalties are severe," he said. "And once you withdraw that money, you pay the penalty and then you can only gradually add it back, in most cases."

According to Frick, that means you lose out on future investment gains once the stock market turns around again.