Skip to main content

You are here

Advertisement

Retirement Savers Stay Focused on Long-Term, Despite 2Q Drop in Balances

Practice Management

Even though average account balances have decreased, given the stock market’s decline in the second quarter, there was also good news to be found in Fidelity’s Q2 2022 Retirement Analysis

The analysis, which is based on the savings behaviors and account balances for more than 35 million IRA, 401(k) and 403(b) retirement accounts, finds that retirement savers continue to look long-term, as total 401(k) savings rates still hovered at record levels and the percentage of employees with 401(k) loans remained low for the fifth consecutive quarter. 

In fact, despite the market volatility of the past two quarters, 401(k) plans continue to see steady contributions from both individuals and their employers. The total savings rate for the second quarter—which reflects a combination of employee and employee 401(k) contributions—continues the positive momentum achieved in the first quarter, with a 13.9% contribution rate, just below Fidelity's suggested savings rate of 15%. Men continued to save at higher rates than women at 14.7% versus 13.7%. Pre-retiree Boomers saved at the highest levels (16.6%), although even Gen Z participants saved in the double digits (10%).

Staying the Course

What’s more, the majority of retirement savers did not make changes to their asset allocation. Only 5% of 401(k) and 403(b) savers made a change to the asset allocation in the second quarter, slightly lower than the 5.3% that made a change in the first quarter and consistent with the number of individuals who made a change to their allocation in the second quarter of 2021. Of the savers making a change this past quarter, Fidelity found that 85% made only one change and the top change involved shifting savings to more conservative investments (38%).

Meanwhile, outstanding 401(k) loans and average loan amounts continued to decline. The percentage of 401(k) savers initiating a new loan continues to remain low, with only 2.4% of participants initiating a loan in the second quarter. In addition, the percentage of participants with a loan outstanding also moved downward, dropping to 16.7% for the second quarter—which is a significant drop compared to 18.9% in the second quarter of 2020.

Average Balances

And while average balances dropped across the board, the drops were below the S&P’s decline of 16.1% for the second quarter and below the first quarter of 2020—the last period with significant market volatility, taking place at the very start of the pandemic.  

According to Fidelity’s data, the average 401(k) balance dropped to $103,800 in the quarter, down 20% from a year ago and 15% from the first quarter of 2022. The average 403(b) account balance decreased to $93,300, down 18% from a year ago and a decrease of 13% from last quarter. The average IRA balance was $110,800 in the second quarter, which was a 12.8% decrease from last quarter.