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Balances in 401(k), 403(b) and IRAs reached record highs in the second quarter of this year after a dip in the first quarter, according to Fidelity Investments.
“Even during periods of turbulence, the majority of savers are wisely making the decision to stay the course and not make sudden changes to their retirement investments," said Sharon Brovelli, president of workplace investing at Fidelity Investments. "This diligence and focus on long-term retirement goals contributed to this quarter's retirement balance rebound, demonstrating the importance of staying calm and not overreacting to market changes."
Analysts attribute the increase to consistent savings and positive stock market performance, despite market volatility at the beginning of the quarter. All three investment products experienced growth of 5% or more over the previous year. The average 401(k) balance increased by 8%, the average 403(b) balance grew by 9% and the average IRA balance rose by 5%.
Among the other significant results for the quarter:
- The total average 401(k) savings rates remained consistent with the record-high first quarter. This was a result of an employee contribution rate of 9.5% and an employer contribution rate of 4.8%. At 14.2%, this number remains close to Fidelity's suggested savings rate of 15%.
- The account balance rebound resulted in a related rebound in 401(k)-created millionaires, which reached an all-time high of 595,000 individuals in the second quarter.
- Despite the turbulence early in the quarter, only 5.5% of retirement savers made a change to their 401(k) asset allocation. Of this group, more than 8 in 10 employees made only one change.
- Although average IRA contributions have remained steady over the past year ($2,223 vs $2,225), contributions for both Gen X and boomers are on the rise, increasing by 25% for Gen X-ers and 37% for boomers from the second quarter of 2024.
"With the market volatility experienced earlier in the quarter, it's understandable that some retirement savers may feel uncertain about how their balances are being impacted," said Robert Mascialino, president of wealth at Fidelity. "However, we're seeing solid 401(k) contributions and more people adding to their IRAs -- especially baby boomers and Gen X, who are continuing to prioritize retirement. It's encouraging to see customers focus on the long game when it comes to investing for retirement.”
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