Alight Solutions 401(k) Index™: 2022 Observations

Steady losses on Wall Street throughout 2022 saw 401(k) investors seek the safety of fixed income investments, according to the Alight Solutions 401(k) Index^TM. Net trading activity for the year was 1.27% — higher than 2021’s level of 0.53% but lower than 2020’s level of 3.52%. There were 41 days of above-normal¹ activity, compared to three in 2021.

“Throughout the more than 25-year history of the 401(k) Index, we have seen people increase their trading activity when stocks drop — a trend that continued in 2022,” said Rob Austin, head of research at Alight. “More than three-quarters of the above-normal¹ trading days (33 out of 41) happened during the first half of the year when the markets were down by 20%. Trading slowed in the second half as Wall Street tried to rally.” 

401(k) investors remained bullish on equities with most contributions going to target date funds², and large cap U.S. equity funds. However, the equity losses resulted in people ending 2022 with 68.2% of their portfolio in equities compared to 70.7% at the beginning of the year. 

Percentage of balances by asset class

The following table shows the returns of major market indices for the year ending December 31, 2022:

¹ A “normal” level of relative transfer activity is when the net daily movement of participants’ balances, as a percent of total 401(k) balances within the Alight Solutions 401(k) Index™ equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months. A “high” relative transfer activity day is when the net daily movement exceeds two times the average daily net activity. A “moderate” relative transfer activity day is when the net daily movement is between 1.5 and 2 times the average daily net activity of the preceding 12 months.

² Target date funds also include the amounts in target risk funds. The amount in the target risk funds is less than 10% of the total.