Sign of confidence? Retirement investors continue to boost contributions, Fidelity study finds
Is there a link between hope, less stress, and greater financial wellness? We don't know, but a Fidelity study seems to show some positive outcomes.
Retirement account balances continue to grow and average contributions are increasing, according to the latest quarterly analysis from Fidelity Investments. Among the second-quarter highlights:
Retirement accounts see modest growth, reach record levels for the third consecutive quarter. The average IRA balance was $134,900, a 4 percent increase from last quarter and a 21 percent increase from the second quarter of 2020. The average 401(k) balance rose to $129,300, a 4 percent increase from the first quarter and up 24 percent from a year ago.
The average 403(b) account balance increased to a record $113,300, an rise of 6 percent from last quarter and 24 percent higher than in the second quarter of 2020.
Baby boomers boost contributions as retirement approaches. As the youngest baby boomers enter their late 50s, many investors in this generation are increasing their contributions to their retirement accounts. A record 18.2 percent made a “catch-up” contribution to their 401(k) in the second quarter, with 58 percent making the maximum catch-up contribution of $6,500 by the end of last year.
Individuals taking a long-term approach to retirement savings continue to see gains. The overall average balance for individuals who have been in their 401(k) plan continuously for 10 years crossed the $400,000 threshold for the first time, reaching $402,700. Among women investors, the average 10-year continuous 401(k) balance reached $324,700. The average balance for 403(b) investors who have been in their plan for 10 years reached $233,300,
401(k) savings rate reaches record level as younger workers increase their contributions. The average 401(k) employee savings rate reached a record 9.3 percent. Over the last year, more than one in three 401(k) savers have increased their savings rate, while only 7 percent of workers have decreased their 401(k) savings rate since the second quarter of 2020.
Workers are feeling a return to normalcy. Although many workers and their employers continue to face financial uncertainty because of the ongoing impact of the pandemic, recent research and positive investment behavior may indicate that they are starting to feel more stability and a sense of normalcy.
“The pandemic is clearly fueling a shift in how Americans prioritize their work, health, personal lives and financial well-being, so it’s encouraging to see a continued improvement of retirement savings rates and individuals expressing more feelings of hope and fewer feelings of stress,” said Kevin Barry, president of Workplace Investing at Fidelity Investments.
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