Fidelity Q3 2021 Retirement Analysis: Retirement Savers “Stay the Course” in Spite of Stock Market Swings and Ongoing Economic Uncertainty

• Record 1.4 Million Gen Z Investors Join Fidelity’s Retirement Platform with the Vast Majority Leveraging Roth IRAs and Target Date Funds
• IRA Balances Increase as 401(k) and 403(b) Balances Dip Slightly
• Retirement Savers Continue to Save, Avoid Major Changes to Asset Allocation

Fidelity Investments, a market-leading workplace benefits company and America’s No. 1 IRA provider¹, released its quarterly analysis of savings behaviors and account balances for more than 30 million IRA, 401(k), and 403(b) retirement accounts. Despite the significant swings in the stock market, the analysis found there were minimal changes to the average retirement account balance with a slight increase to the average IRA balance and moderate decline in both the average 401(k) and 403(b) balances.

“One of the most important retirement savings behaviors we highlight with customers is to keep a long-term approach and not make changes to a retirement savings strategy based on short-term market events”

The majority of retirement savers continued to take a long-term approach by maintaining their contribution levels to workplace savings and not making significant changes to their asset allocation. This is especially true among the record 1.4 million Gen Z (born between 1997-2012, as defined by Pew Research) retirement investors now saving with Fidelity.

HR Technology News: HR Tech RADAR 2021: Top 250 HR SaaS Technology Companies You Should Follow

“One of the most important retirement savings behaviors we highlight with customers is to keep a long-term approach and not make changes to a retirement savings strategy based on short-term market events,” said Kevin Barry, president of Workplace Investing at Fidelity Investments. “The stock market and economic landscape will shift many times throughout a lifetime, so taking a consistent approach, making steady contributions and maintaining your asset allocation are key to reaching your retirement savings goals.”

Highlights from Fidelity’s Q3 2021 analysis include:

• Account balances tapered off in Q3, but average balances still up double digits from a year ago. The average IRA balance² was $135,700, a slight increase from last quarter and a 15% increase from Q3 2020. The average 401(k) balance³ dipped to $126,100 in Q3, a 2% decrease from Q2 but an increase of 15% from a year ago. The average 403(b) account balance⁴ decreased to $110,800, down 6% from last quarter but up 13% higher than in Q3 2020.

Average Retirement Account Balances

• Number of Gen Z⁵ retirement savers reach record levels. The number of Gen Z investors across Fidelity’s retirement platform reached a record 1.4 million in Q3, nearly double the number of Gen Z investors from one year ago. Gen Z retirement savers with an IRA overwhelming utilize Roth IRAs for their savings, with contributions to Roth IRAs making up 95% of total contributions in the third quarter. Among 401(k) and 403(b) plans, many Gen Z workers are automatically enrolled in their plan and defaulted into a target date fund – as a result, 86% of Gen Z workers are holding 100% of their savings in a target date fund.
• Contributions to workplace retirement accounts hit record levels. Retirement savers continued to utilize workplace savings plans in Q3, as contributions to 401(k) and 403(b) plans reached record levels. The average 401(k) contribution rate reached a record 9.4% this quarter, marking the fifth consecutive quarter the overall 401(k) contribution rate has increased. In addition, total contributions to 403(b) accounts over the past 12 months reached a record $6,250, with more than 70% of 403(b) savers making a contribution to their account.

“Over the past two years, we are seeing the next generation of investors rise up and get more engaged with their finances, leading to more than 4.7 million new retail accounts⁶ on Fidelity’s platform, and it’s encouraging to see so many young people planning for their future,” said Kelly Lannan, vice president, Young Investors at Fidelity Investments. “Whether saving in an employer’s workplace plan or contributing to a Roth IRA, these accounts can be a great way to start saving for retirement. Gen Z and Millennials may get an undeserved rap that they are mainly ‘living in the now’ but we know from our Fidelity Spire app users⁷ that retirement is the number one long-term goal they are trying to reach.”

HR Technology News: UKG Exceeds Goals for Full-Year, Q4 Financial Results

Despite market swings and economic uncertainty, retirement savers ‘stayed the course’

Fidelity’s third quarter analysis found that, despite the stock market uncertainty in Q3 and the continuing economic impact of the pandemic, the majority of retirement savers did not make any changes to the asset allocation within their account and the percentage of outstanding 401(k) loans continues to trend downward. In addition, while most 401(k) savers maintained their contribution rate, some individuals took steps to boost the amount their savings rate:

• Fewer individuals made changes to the asset allocation within their 401(k). The percentage of 401(k) savers that made a change to their asset allocation dropped for the third consecutive quarter, with only 5.1% of 401(k) savers making a change, the lowest percentage since Q3 2019. Among Gen Z workers, the percentage dropped to 2.4%.
• Percentage of outstanding 401(k) loans sets a new record low. The percentage of workers with an outstanding loan from their 401(k) reached a record low 17.3% in Q3, a full percentage point lower than Q3 of last year (18.7%). The percentage of workers with an outstanding 401(k) loan has dropped in seven of the last eight quarters.
• Contributions remained consistent. More than 97% of 401(k) savers either maintained or increased their contribution rate in Q3. Among the slightly more than 8% of 401(k) savers that increased their contribution rate, the average contribution increase was 3.7%.

HR Technology News: Qualtrics and AWS Expand Relationship to Transform Customer Feedback Into Enhanced Experiences