After reporting record-breaking balances for the first half of 2021, Fidelity Investment’s latest analysis shows that while average IRA balances are still increasing, there’s been a “moderate decline” from the previous quarter for 401k and 403b plans. The Boston-based investment company looked at more than 39 million of its 401k, 403b and IRA accounts to develop its newly released report. Key findings on average retirement plan balances include:
- IRA’s rose to $135,700–up $800 from the second quarter, but more than double the previous year’s average balance
- 401k balances dipped from $129,300 last quarter to $126,100 in the new analysis. However, like IRAs, it’s almost double from the same 2020 time period
- For 403b balances, the decline was similar to 401k plans, dropping from $113,300 to $110,800 in the third quarter. But again, that’s compared to just a $50,100 average balance in Q3 2020.
The trend continues with the number of IRA millionaires up a little over 4%, reaching 356,300. And while the 401k millionaires count dropped to 404,000 (from 412,000), Fidelity says it’s still 50% higher than it was a year ago.
Fidelity also notes that the majority of retirement savers maintained their workplace contributions during a period of economic uncertainty, continuing a “long-term” outlook and by not making significant changes to their asset allocation. Contributions to 401k and 403b plans reached record levels. The average 401k contribution rate reached a record 9.4% this quarter, marking the fifth consecutive quarter that overall 401k contribution rates increased. Total contributions to 403b accounts over the past 12 months reached a record $6,250, with more than 70% of savers making a contribution to their account.
“One of the most important retirement savings behaviors we highlight with customers is to keep a long-term approach and not make changes to a retirement savings strategy based on short-term market events,” said Kevin Berry, Fidelity’s President of Workplace Investing.
Gen Z retirement investors rev up
Gen Z found a way to bring some additional bright spots to the report with Fidelity noting that a record 1.4 million are onboard with retirement savings plans. This is nearly double the number of Gen Z investors from a year ago. This group overwhelmingly utilizes Roth IRAs for their savings, with contributions making up 95% of total contributions in the third quarter. Diving deeper into the data, Fidelity says that among 401k and 403b plans, many Gen Z workers are automatically enrolled in their plan and defaulted into a target date fund – as a result, 86% of Gen Z workers are holding 100% of their savings in a target date fund.
“Over the past two years, we are seeing the next generation of investors rise up and get more engaged with their finances, leading to more than 4.7 million new retail accounts on Fidelity’s platform, and it’s encouraging to see so many young people planning for their future,” noted Kelly Lannan, Vice President for Fidelity’s Young Investors group. She adds that while Gen Z and Millennials may get an undeserved rap that they are mainly ‘living in the now,’ “retirement is the number one long-term goal they are trying to reach.”
Lynn Brackpool Giles is a contributing editor to 401(k) Specialist. Giles is a former Managing Director of Communications and Consumer Services for the Financial Planning Association (FPA), where she oversaw all corporate, legislative, and consumer communications. In her current journalistic practice, she is a frequent contributor to numerous financial services industry publications.
IRA’s rose to $135,700 . . .
401k balances . . . almost double from the same 2020 time period . . .
number of IRA millionaires up a little over 4%, reaching 356,300 . . . .
401k millionaires count . . . still 50% higher than it was a year ago . . . .
Why?
Because the equity markets are making record highs in the longest secular bull market ever.