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Fidelity Average 401(k) Account Balances Hit Another High

Industry Trends and Research

Fidelity Investments’ quarterly analysis of more than 30 million IRA, 401(k), and 403(b) retirement accounts finds that average retirement account balances increased to record levels for the third consecutive quarter, with long-term retirement savers seeing significant gains.

While many Americans are still addressing challenges posed by the pandemic, the firm’s second quarter 2021 analysis reveals positive results across retirement account balances, contributions and savings behaviors, as well as positive investor sentiment, with workers reporting reduced levels of stress and anxiety. 

According to the findings, the average 401(k) balance increased to $129,300 in the second quarter, which was a 4% increase from the first quarter and up 24% from a year ago. The average 403(b) account balance increased to a record $113,300, an increase of 6% from last quarter and 24% higher than in the second quarter of 2020. Similarly, the average IRA balance was $134,900, a 4% increase from last quarter and a 21% increase from second quarter of 2020.

Average Retirement Account Balances

 

Q2 2021

Q1 2021

Q2 2020

Q2 2011

IRA

$134,900

$130,000

$111,500

$72,200

401(k)

$129,300

$123,900

$104,400

$73,000

403(b)

$113,300

$107,300

$91,100

$56,300

In addition, with the youngest Baby Boomers entering their late 50s, Fidelity found that many investors in that generation are increasing their contributions to 401(k) and IRA accounts. A record 18.2% of Baby Boomers made a “catch-up” contribution to their 401(k) in the second quarter, with 58% of Boomers making the maximum catch-up contribution of $6,500 by the end of last year. Moreover, the average 403(b) contribution rate for Baby Boomers increased to 10.9% in the second quarter. 

Those individuals taking a long-term approach to retirement savings continue to see gains. The overall average balance for individuals who have been in their 401(k) plan continuously for 10 years crossed the $400,000 threshold for the first time, reaching $402,700 in the second quarter. 

Among women investors, the average 10-year continuous 401(k) balance reached $324,700. The average balance for 403(b) investors who have been in their plan for 10 years reached $233,300, nearly three times the average 10-year continuous balance in the second quarter of 2011.

Contribution Rates Increase

Other key findings from the analysis show that 401(k) savings rate reached record levels as younger workers increased their contributions. The average 401(k) employee savings rate reached a record 9.3% in the second quarter. Over the last year, more than one in three (38%) 401(k) savers increased their savings rate, while only 7% of workers decreased their 401(k) savings rate since the second quarter of 2020. 

Additionally, 54% of Gen Z workers increased their 401(k) savings rate over the last year, while 43% of Millennials have increased their savings rate since the second quarter of 2020.

Positive Savings Behavior

The positive sentiment among 401(k) savers is also reflected in investor behavior, specifically in the areas of 401(k) loans and asset allocation, Fidelity notes.

Decreasing Loans. Among the positive investing behaviors are that the percentage of outstanding 401(k) loans remained at a record low. According to the analysis, 17.5% of individuals had an outstanding loan from their 401(k) in the second quarter, which was a record low percentage and consistent with the percentage of outstanding 401(k) loans in the first quarter. 

The study does show a slight uptick in newly initiated 401(k) loans, rising from 1.6% in the first quarter of 2021 to 2.2% in the second quarter. Similarly, the percentage of workers who made a withdrawal from their 401(k), including hardship withdrawals, increased to 3% from 2.4% in the first quarter, although it remains lower than the 5.6% rate of a year ago.

Asset Allocation Changes. Fewer individuals are making changes to the asset allocation within their 401(k), Fidelity found. Only 5.3% of 401(k) savers made a change to their asset allocation in the second quarter, the lowest percentage since the fourth quarter of 2019. Of the 401(k) savers who made a change to their allocation, Fidelity notes, 80% made just one change in the quarter.

Well Being. Fidelity notes that a recent survey of its 401(k) plan participants found that the percentage of workers who reported feeling stressed dropped from 41% last November to 27% this May. Moreover, the percentage of workers who reported feeling anxious dropped from 37% to 20% over the same period.

At the same time, the percentage of workers who reported feeling hopeful increased from 32% to 42% between November and May, while the percentage of individuals that reported feeling calm increased from 20% to 32% during the same period.

“The pandemic is clearly fueling a shift in how Americans prioritize their work, health, personal lives and financial well-being, so it’s encouraging to see a continued improvement of retirement savings rates and individuals expressing more feelings of hope and fewer feelings of stress,” notes Kevin Barry, President of Workplace Investing at Fidelity Investments. 

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