Fidelity Investments report that the average 401(k) balance dipped slightly during second quarter 2015 to $91,100 from $91,800 at the end of the first quarter. It further noted balances are nearly flat when compared with the same time a year prior.
However, IRA balances increased to $96,300 for the same period and from $92,500 one year ago.
Contributions
The average 12-month total savings amount, which combines employee contributions and employer contributions (such as a company match), increased from $9,840 at the end of Q1 to $10,180 at the end of Q2 – the first time the total savings amount has surpassed $10,000.
The average IRA contribution dipped to $2,690 at the end of Q2 from $3,150 at the end of Q1, primarily due to the significant number of people making contributions to their IRA in Q1 to meet the IRS tax deadline.
Loans
While average balances have increased over the past several years, higher savings balances could be contributing to increased loan activity among 401(k) account holders. While the percentage of people initiating a loan (10.1 percent) and the percentage of loans outstanding (21.9 percent) have remained steady over the last several quarters, the average 401(k) loan amount continues to increase.
For the previous 12 months, the average loan amount reached $9,720 at the end of Q2, up from $9,630 at the end of last quarter and $9,500 a year ago.
Risk
While a rising stock market is one reason the average 401(k) balance is up 50 percent in the last five years, this has led to an increased percentage of equities within many 401(k) accounts, which obviously can add increased exposure to the negative impact of a market downturn.
Many older 401(k) account holders, including Baby Boomers close to retirement age, had stock allocations higher than those recommended for their age group. Fidelity compared average asset allocations to an age-based target date fund and found 18 percent of people 50-54 had a stock allocation at least 10 percentage points or higher than recommended, and for people ages 55-59, that figure increased to 27 percent.
An additional 11 percent of people ages 50-54 had 100 percent of their 401(k) assets in stocks, while 10 percent of people ages 55-59 had all of their 401(k) assets in stocks.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
