Despite concerns about higher interest rates, rising inflation and continuing pandemic effects, the vast majority of 401(k) and 403(b) savers did not make any change to their allocation in the second quarter, Fidelity Investments reported this week.
Of those who did make a change, 85% made only one, and the top one involved shifting savings to more conservative investments.
"Although many Americans are understandably concerned about the economy, record-high inflation and markets at this time, it's encouraging to see the prevailing emotion has been to stay calm and focused on one's retirement objectives," Kevin Barry, president of workplace investing at Fidelity Investments, said in a statement.
But concerned they are. A Fidelity Investments survey conducted in April among 1,100 adults found that more than half were highly concerned about the health and stability of the economy. As a result, 19% said they had adjusted their retirement strategy and were taking a more conservative approach to their retirement savings.
Q2 Analysis
In its new report, Fidelity Investments analyzed second-quarter savings behaviors and account balances for some 35 million IRA, 401(k) and 403(b) retirement accounts.
It found that although average account balances decreased, the decline in average balances was below the S&P's 16.1% drop in the second quarter and below the decline in the first quarter of 2020, the last period of significant market volatility:
- IRA: The Q2 average balance was $110,800, down 12.8% quarter over quarter
- 401(k): $103,800, down 15%
- 403(b): $93,300, down 13%
Not only that, retirement savers maintained their long-term outlook as total 401(k) savings rates still hovered at record levels. The total savings rate for the second quarter — which reflects a combination of employee and employee 401(k) contributions — stood at 13.9%, just below Fidelity's suggested savings rate of 15%.
Men continued to save at higher rates than women, pre-retiree baby boomers saved at the highest levels, at 16.6%, and Generation Z participants saved in the double digits, at a 10% rate.
Among Gen Z 401(k) savers who are heavily invested in target date funds, the average account balance fell by only 8% from the first quarter. Eighty-five percent of Gen Z savers have all of the 401(k) savings in a target date fund, according to the analysis.
The analysis further showed that the number of IRAs on Fidelity's platform increased by 10.6% over the 2021 second quarter, reaching 12.8 million. Gen Z accounts increased by 87%, and millennials' by 24%.
