Fidelity: Retirement account balances are down from a year ago but rebounding

Balances for IRA and 401(k) accounts were up over 30% compared to 10 years ago

Americans’ average retirement account balances declined year-over-year but are stabilizing and began to rebound at the end of 2022, according to new research from Fidelity Investments.

Fidelity’s research, which was released on Thursday, showed that average retirement account balances were down in the fourth quarter of 2022 compared to the same period in 2021, but were up from the prior quarter. Balances in 401(k) accounts were an average of $103,900 in Q4 2022 — down from $130,700 in Q4 2021 but rebounded from $97,200 in Q3 2022. The research showed a similar trend for average IRA balances, which were at $135,600 in Q4 2021, then fell to $101,900 in Q3 2022, before rebounding to $104,000 in Q4 2022.

"Given all the stresses in the world today, such as natural disasters and geopolitical events, Americans continue to confront challenging times in our economy," said Kevin Barry, president of Workplace Investing at Fidelity Investments. "Fortunately, the data shows that retirement savers understand the importance of saving for the long-term, despite market shift. We are encouraged to see people look past the current volatility and continue to make smart choices for their future."

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Fidelity Investments

Fidelity found that average retirement balances declined in Q4 2022 when compared to Q4 2021, but had risen compared to Q3 of 2022. (AP Photo/Richard Vogel / AP Newsroom)

Fidelity's data showed that taking a long-term view of retirement savings can pay off for investors, as IRA balances were up 36% from 10 years ago, and 401(k) balances were up 34% over the same period.

Total 401(k) savings rates held relatively steady at 13.7% in Q4 2022, compared to 13.8% in Q3 2022 and 13.9% in Q2 2022, according to the research. That figure is slightly below Fidelity’s suggested savings rate of 15%.

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Savings Investment Volatility

"Year over year, the trends are consistent — if you start saving earlier and avoid reacting to market volatility, you will be better off in the long run," said Joanna Rotenberg, president of Personal Investing. (iStock / iStock)

There was a generational divide in savings rates, as pre-retiree Boomers saved at the highest level and came in at an average of 16.5%, while Gen Z saving levels were relatively consistent at 10.2% — just one-tenth of a percent below the prior quarter.

Fidelity’s research also found that Millennials and Gen Z are opening more IRA accounts. Gen Z IRA accounts increased by 71% compared to Q4 2021, while the number of IRAs belonging to Millennials rose by 22% from a year ago.

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Saving Money Cash and Coins

Millennials and members of Gen Z opened more IRA accounts in 2022 compared to the prior year, according to Fidelity's research. (iStock / iStock)

"Year over year, the trends are consistent — if you start saving earlier and avoid reacting to market volatility, you will be better off in the long run," said Joanna Rotenberg, president of Personal Investing. 

"This analysis shows that younger generations are sticking to their plans and working on building good savings habits — from budgeting daily expenses and automatically increasing contributions to taking advantage of an employer match. This is especially important during periods of inflation when the money you’re accumulating needs to go further," Rotenberg added.

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Fidelity’s research also found that contribution rates rose slightly, with one-third increasing their contribution rate over the last year by an average increase of 2.6% among 401(k) savers.

It also found that outstanding 401(k) loans and average loan amounts continued to trend downward, dropping by 17% from a year ago and 21% compared to five years ago. Only 3.2% of Gen Z workers had an outstanding loan at year-end.

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