PROVIDENCE – Market lows are cutting into retirement account balances but they haven’t stopped savers from socking away more money, according to Fidelity Investments Inc.
The Q1 2022 Retirement Analysis showed that while average retirement account balances decreased in the first quarter of 2022 amid a market decline, 401(k) savings rates hit an all-time high of 14% thanks to employer and employee contributions.
“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,” Kevin Barry, president of workplace investing at Fidelity, said in a statement. “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. Encouragingly, Fidelity’s analysis found that the majority of retirement savers continued to demonstrate positive savings behavior, which will help keep them on track to reach their goals.”
The decline in average account balances was still less than the drop in market performance over the course of the first quarter, according to Fidelity. 403(b) accounts saw the biggest quarterly drop, down 6% to $107,600, while the average 401(k) and Roth IRA balances were down 2% over the prior quarter to $121,700 and $121,100, respectively.
A majority of savers across all types of accounts kept their asset allocations the same despite the volatile market. And just 2% of those with 401(k)s took out a loan from their savings, while the percentage of savers with outstanding loans declined to 16.6%.
The study also found that IRA accounts continue to grow in popularity, increasing 2% over the prior quarter to 12.5 million accounts. These types of savings accounts are even more popular among millennial investors, who reported an 11.3% increase in Roth IRA accounts compared with the prior quarter.
The study also included information on long-term 401(k) savers, who have been in their same plans with the same employers for at least five years. Those with a five-year savings record saw their average balance increase 127.7% over the last five years. Growing balances were even more pronounced among 10- and 15-year savers, whose average balances rose by 350% and 644%, respectively.
The study reflects analysis of 24,000 corporate defined contribution plans and 21.2 million plan participants.
Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.
