The Market Tanked, but XPO Logistics Employees Kept Piling Money Into Their 401(k)s

According to the 2022 Stress in America study published by the American Psychological Association, 65% of Americans say that money is a significant source of stress, the highest level recorded by the annual survey since 2015. With that taken into account, those working for XPO Logistics should understand the impacts of this recent economic downturn on investor activity. The Federal Reserve reports that more than half of US adults and their partners received non-labor income in 2020, which can come from sources like investments , interest , social security, and unemployment. With inflation rapidly increasing and poor market performance, Americans had to resist the urge to liquidate assets in their retirement accounts. An estimated 90% of investors in the 401(k)-style retirement plans administered by Vanguard Group maintained or increased their savings rate in 2022. Furthermore, trading activity amongst retail investors managing their own assets reached a two-decade low. With the S&P 500 undergoing a yearly devaluation of proportions equal to those of 2008, retirement savers refrained from selling assets and relinquishing their long-term financial security. Due to their engagement in retirement savings programs, XPO Logistics workers with 401(k) accounts continue to invest, save, and resist impulsive financial decisions based on emotion.

As personal savings rates decline and credit-card balances return to pre pandemic levels, American consumers are conveying signs of financial stress. In the 2022 Financial Health Network’s annual Financial Health Pulse Report, the percentage of Americans considered financially healthy decreased by 3%, from 34% in 2021 to 31% in 2022. Despite that, there has been a 0.1% decrease in unemployment from last year’s November-December rates, and hourly earnings for private-sector employees experienced a 4.6% increase from December 2021. According to data published in June by Vanguard, 9% of workers with 401(k) accounts scaled back their savings rate from 2021, expressing a 2% increase from the 7% who did so a year prior. Only 6% of investors who manage their own 401(k) assets transferred money from one fund to another in the past year, expressing a 2% decrease from a value of 8% in 2021, and a 4% decrease from a value of 10% in 2020. Furthermore, people in Vanguard 401(k) plans held 74% of their assets in stocks, which represents a 2% increase from 72% in 2020.

With everything taken into consideration, those employed in XPO Logistics must acknowledge how investors’ determination to hold onto their assets throughout market declines may be partially attributed to automatic features catered to removing impediments in saving and investing. Among an estimated 1,700 plans utilizing Vanguard’s services, 58% are enrolled in target-date funds, representing an increase of 26% from 2012’s 32% rate. Target-date funds typically include a mix of stocks and bonds which are partly based on an investor’s age and planned retirement date upon opening the fund, creating a “glide path”. The glide path is designed to elect a growth-oriented approach during an individual’s prime earning years, then focus on capital preservation nearing retirement age or “target” year (1). In addition to that, most of these plans increase employees’ savings rate by a certain percentage (typically 1%) every year, until reaching a limit of 10% or more. Richard Thaler, a behavioral economist and Nobel Prize winner recognized for his contributions towards automatic 401(k) features compares these advances to GPS driving. Thaler mentions that these features enable investors to take the right approach and stay the course, nullifying the need for overthinking.

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Despite these features, those working for XPO Logistics must also acknowledge how the market’s strong performance in recent years may justify investors' confidence to continue holding stocks. While experiencing a 19.4% downturn in 2022, the S&P expresses an annualized return of 11.3% between the periods of 2019 - 2022. According to Dow Jones Market Data, that value exceeds the index’s 5.8% annualized return since 1928.

Albeit the market’s strong performance, XPO Logistics employees should be aware that not all metrics suggest improving retirement safety nets. With an increasing amount of early withdrawals from qualified retirement accounts, and a 20% decline in average 401(k) balance to $112,572 in 2022, more Americans struggled to keep up with financial emergencies and higher prices. Hardship distributions for events such as preventing evictions and paying medical bills attained a record high. Loan initiations increased by 9%. With these factors taken into account, those employed in XPO Logistics should contact a financial advisor to avoid the consequences mentioned above. With proper financial planning, The Retirement Group caters towards your personal financial needs and develops a customized plan ensuring a comfortable retirement.

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