Employers' goals might be derailed by resignations, but participants' savings stay on track

Although workers are changing jobs or leaving the workforce at record numbers during the Great Resignation, their retirement savings remain on track.

“Despite facing a variety of financial hurdles in 2021, including ongoing market uncertainty and a shifting employment landscape, investors did not let the events derail their efforts and continued to stay focused on the key fundamentals of retirement savings,” said Kevin Barry, president of workplace investing at Fidelity Investments.

“By making regular contributions to retirement accounts, not cashing out savings when they change jobs and taking advantage of their employer’s contributions, individuals were able to keep their savings on track as we head into 2022.”

Fidelity’s analysis of more than 35 million retirement accounts in the fourth quarter of 2021 found several positive trends:

Retirement account balances saw strong gains. The average IRA balance was $135,600, a slight decrease from the previous quarter but a 6 percent increase from the same period in the previous year. The average 401(k) balance climbed to a record $130,700.

Double-digit growth in IRA accounts, led by Gen Z. The highest level of growth was among Gen Z investors, where the number of accounts grew by 146 percent.

More than a third of workers increased their 401(k) and 403(b) savings rates. A record 38 percent of individuals increased their 401(k) contributions in 2021, with an average increase of more than 3 percent. In addition, 34 percent of 403(b) savers increased their contribution rate. Employers continue to make contributions to their employees’ retirement savings. By the end of 2021, 83 percent of workers had their employer make a contribution in addition their own 401(k) contributions, with the average employer contribution reaching $4,080.

Workers focus on retirement savings, even as many switch jobs. Positive worker behavior, combined with increasingly popular 401(k) plan features, may dampen any notable impact to American worker’s retirement savings.

Workers are not cashing out their 401(k) savings when they leave their job. Nearly one-quarter rolled their savings to an IRA, 15 percent rolled their savings into their new employer’s 401(k) or 403(b) plan and 18 percent decided to leave their savings with their previous employer.

A growing percentage of employers are automatically enrolling new employees in 401(k) plans and at a higher savings rate. More than one-third of plans that use auto enrollment will sign up new employees at a 5 percent contribution rate or higher, up from 28 percent of plans five years ago.

After employees are automatically enrolled in their 401(k), they usually stay in. Fewer than 10 percent of employees who are automatically enrolled in their 401(k) plan decide to opt out.