Despite the market volatility in Q1 and its impact on account balances, Fidelity’s Q1 2022 retirement trends update released today found that most investors “stayed the course” and continued to take positive steps to save for retirement.
The quarterly analysis found that while average account balances decreased (driven largely by the stock market’s performance), the total 401(k) savings rate reached record levels, the number of IRAs on Fidelity’s platform increased and the percentage of employees with a 401(k) loan dropped for the fourth consecutive quarter.
The analysis of savings behaviors and account balances for Fidelity’s more than 35 million IRA, 401(k), and 403(b) retirement accounts found the total 401(k) savings rate hit a record high of 14%, just shy of the company’s suggested savings rate of 15%.
“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.”
Fidelity’s Kevin Barry
Very few people made changes to the allocation within their account. Only 5.6% of 401(k) savers made a change to the allocation within their 401(k) account in the first quarter, and only 4.4% of 403(b) savers made a change. Of the 401(k) savers that made a change to their allocation in the quarter, 82% only made one change.
“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,” said Kevin Barry, president of Workplace Investing at Fidelity Investments. “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.”
Average retirement account balances decreased, but slightly less than market decline in Q1, the analysis found. The average 401(k) balance dropped to $121,700 in the quarter, down 2% from a year ago and 7% from Q4 2021.
Importantly, among Gen Z savers, who are heavily invested in target date funds, the average account balance only dropped 0.4% from last quarter. As of Q1, 85% of Gen Z savers had all of their 401(k) savings in a target date fund.
For the first quarter 2022, the Dow and S&P 500 closed down 4.6% and 4.9%, respectively, while the Nasdaq lost 9%. For the three major averages, this was worst period since the first quarter of 2020, which marked the start of the Covid pandemic in the U.S.
IRA balances drop, but number of accounts grows
The average IRA balance was $127,100 in Q1, a 2% decrease from Q1 2021 and a 6% decrease from last quarter. The average 403(b) account balance decreased 7% to a $107,600, slightly higher than Q1 2021 and a decrease of 6% from last quarter.
The analysis did reveal significant growth in IRA accounts, especially among Millennials. The total number of Fidelity IRA accounts continued to climb, reaching 12.5 million, a 2% increase over Q4 and an 11% over Q1 of last year. Millennial Roth IRA accounts increased 11.3% in Q1 2022 compared to Q1 2021, while the number of IRA accounts among female Millennial investors increased by 26% over the last year.
Millionaire ranks drop
Thanks to that slumping stock market, the number of 401(k) millionaires—those with at least seven-figure 401(k) account balances—declined from 442,000 at the end of 2021 to 406,000 as of March 31, 2022. That’s slightly more than the 404,000 401(k) millionaires at the end of Q3 2021. At the end of 2020, there were 334,000 401(k) millionaires.
The number of IRA millionaires fell from 376,100 at the end of 2021 to 346,800 at the end of Q1 2022.
Long-term savers see significant growth in retirement savings
Fidelity regularly monitors the 401(k) account balances for individuals who have been participating in the same 401(k) plan, with the same employer, over a multi-year period. Data on these “continuous” savers helps illustrate how 401(k) savings can grow over time and can help demonstrate the benefits of taking a long-term approach to retirement savings.
Following is 401(k) account information for individuals who have been in their 401(k) plans for five, 10 and 15-year periods:
- Five-year continuous savers: For individuals who have been in their company’s 401(k) plan continuously for five years, the average balance grew to $257,400, up from $115,000 in Q1 2017. As of Q1, just over 4.3 million individuals on Fidelity’s 401(k) platform have been in their plan for five years straight.
- 10-year continuous savers: For individuals who have been saving in their 401k for 10 years straight, the balance has grown to $383,100, up from $85,100 in Q1 2012. There are currently 1.7 million individuals who have been in their 401(k) plan for 10 years straight.
- 15-year continuous savers: For individuals who have been participating for the last 15 years, the account balance has grown to $482,900, up from $64,900 in Q1 2007. There are currently 763,000 individuals in this group.
For more information on Fidelity’s Q1 2022 analysis, click here to access Fidelity’s “Building Financial Futures” overview, which provides additional details and insight on retirement trends and data.
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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.
