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Tags: fidelity 401k balances | deferral rates | staying the course | retirement savings | income

Fidelity 401(k) Savers Defer 14%, Grow 5-Year Balances to $257k

401(k)
(Dreamstime)

By    |   Thursday, 19 May 2022 03:52 PM EDT

Fidelity 401(k) retirement accounts saw record deferral rates of 14% in the first quarter of 2022, with an average 401(k) balance of $121,700, a report released Thursday reveals.

401(k) savers who stayed the course and consistently remained invested in their accounts for the past five years have average balances of $257,400, up from $115,000 in 1Q17. Those who have been saving for the past 10 years have average balances of $383,100, up from $85,100 in 1Q12, and the average balances for 15-year savers have grown to $482,900, up from $64,900 in 1Q07.

Tuning Out the Volatility

Famed Fidelity portfolio manager Peter Lynch once said, “Your stomach is more important than your brain in investing.” Given the extreme market volatility of the past two months, that adage holds true today.

As Fidelity Investments Workplace Investing President Kevin Barry puts it: “During periods of economic uncertainty, it’s important for retirement savers to stay focused on their long-term savings goals and not make knee-jerk reactions to short-term market events. While the market’s performance does impact account balances in the near term, consistent contributions and having an appropriate asset allocation are just as important for a successful long-term retirement savings strategy.”

Fidelity said another positive sign is that the percentage of employees with a 401(k)-loan declined for the 4th straight quarter.


Fidelity also discovered substantial growth in the number of individual retirement accounts (IRAs), as the total number reached 12.5 million, 11% more than a year ago. Similarly, the number of Roth IRA accounts for Millennials saw an increase of 11.3% compared to one year ago, a sign that saving among the Millennial generation remains strong.

In another sign workers are “staying the course,” Fidelity found just 5.6% of 401(k) savers changed their allocation in the first quarter, lower than the 6.4% who made an allocation change one year ago.

While this is undoubtedly positive news, the average retirement account balances did decline in the first quarter of 2022. The average IRA balance was 2% lower than a year ago, and 401(k)s saw an especially concerning decline of 7%, with balances standing at $127,100 and $121,700, respectively, in the first quarters of 2022 and 2021.

These declines occurred before the more volatile months of April and May in the stock market, as the accelerating volatility has caused investors more broadly to become more hesitant.

Cold Feet

The positive news in Fidelity’s latest quarterly retirement savings report may not last long, however. Widespread stock declines have continued to pummel Wall Street, and investors are taking notice. Only 18% of Americans plan to increase their stock market investments this year, according to a Bankrate report issued Thursday.

Heightened market volatility and increasing inflation are cited by survey respondents as the primary reasons for choosing not to invest in the market, with women and highly educated investors particularly hesitant.

© 2022 Newsmax Finance. All rights reserved.


StreetTalk
Fidelity 401(k) retirement accounts saw record deferral rates of 14% in the first quarter of 2022, with an average 401(k) balance of $121,700, a report released Thursday reveals.
fidelity 401k balances, deferral rates, staying the course, retirement savings, income
474
2022-52-19
Thursday, 19 May 2022 03:52 PM
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