It’s a good news/bad news scenario when considering Fidelity Investments’ Q1 2025 retirement analysis, released today.
“Although the first quarter of 2025 posed challenges for retirement savers, it’s encouraging to see people take a continuous savings approach which focuses on their long-term retirement goals.”
Fidelity’s Sharon Brovelli
The good news? The total 401(k) savings rate from both employer and employee contributions increased to a record 14.3%, approaching Fidelity’s long-recommended rate of 15%. The total 403(b) savings rate held steady at 11.8%.
The bad news? Average 401(k), 403(b), and IRA balances ended the first quarter of this year slightly lower, primarily as a result of market swings. The S&P 500 index fell by approximately 4.6% during Q1 2025, marking its worst quarterly performance since the third quarter of 2022, and the Dow Jones Industrial Average (DJIA) decreased by about 1.5%.
The average 401(k) balance in Q1 2025 was $127,100, which is down 3% from Q4 2024 and up just 1% from Q1 2024. Taking a slightly longer view, it is up 39% from Q1 2020.
As for 403(b) accounts, the average balance at the end of Q1 2025 was $115,424, down 2% from Q4 2024 and up 2% from Q1 2024. IRA savers had the worst quarter, with the average balance coming in at $121,983—a 4% decline from Q4 2024 and down 1% from Q1 2024.
“Although the first quarter of 2025 posed challenges for retirement savers, it’s encouraging to see people take a continuous savings approach which focuses on their long-term retirement goals,” said Sharon Brovelli, president of Workplace Investing at Fidelity Investments. “This approach will help individuals weather any type of market turmoil and stay on track to reach their retirement goals.”
Fidelity reported that the average employee 401(k) contribution rate hit 9.5% while the employer contribution rate reached 4.8%–the highest level to date. That combined rate of 14.3%, Fidelity noted, is the closest it’s ever been to its suggested savings rate of 15%.
More good news is that the market volatility didn’t cause participants to cut back on contributing to their retirement accounts. 17.4% increased their 401(k) contribution rate while only 4.9% decreased it and only 0.9% stopped contributing at all. Only 6% changed their 401(k) asset allocation during the quarter. For 403(b) plans, 14.6% increased their contribution rate and only 3.5% decreased it (4.7% changed their asset allocation).
More highlights
• 401(k) millionaires down: According to Fidelity, 512,000 savers were so-called “401(k) millionaires” in the first quarter (those with seven-figure account balances), down about 4.6% from 537,000 in Q4 2024.
• Employee investing behaviors: the percentage of workers contributing to a Roth 401(k) increased to 16.8% in the first quarter (up from 15.2% one year ago), while the percentage of individuals initiating a new 401(k) loan dropped slightly from one year ago (2.3% vs. 2.4%).
• IRA contributions continue to increase: Despite a slight drop in the average account balance, IRA contributions have increased 4.5% from a year ago ($3,231 vs. $3,093). This is particularly notable for Baby Boomers, where average contributions went up 21% from Q1 last year ($5,272 vs.$4,348).
As one of the country’s leading workplace benefits providers and America’s No. 1 IRA provider, Fidelity’s latest quarterly analysis of savings behaviors and account balances for more than 50 million IRA, 401(k), and 403(b) retirement accounts can be found here.
SEE ALSO:
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• 401(k) Millionaire Ranks Grew 27% in 2024: Fidelity
• Women Expect 2025 to be ‘Year of Living Practically’ Financially: Fidelity
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.