{"id":10397,"date":"2025-06-15T16:22:54","date_gmt":"2025-06-15T20:22:54","guid":{"rendered":"https:\/\/kerryhannon.com\/?p=10397"},"modified":"2025-06-15T16:27:21","modified_gmt":"2025-06-15T20:27:21","slug":"401k-savers-stayed-strong-through-market-volatility-fidelity-found","status":"publish","type":"post","link":"https:\/\/kerryhannon.com\/?p=10397","title":{"rendered":"401(k) savers stayed strong through market volatility, Fidelity found"},"content":{"rendered":"
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Retirement savers weathered a chaotic stretch of market gyrations in the first three months of the year, consistently adding to their savings, according to\u00a0Fidelity Investments\u2019 quarterly analysis<\/a>.<\/p>\n

While they experienced a drop in average 401(k), 403(b), and IRA balances, mostly due to\u00a0market swings<\/a>, savings rates remained consistent, with the average 401(k) savings rate increasing to a record 14.3%.<\/p>\n

Read on Yahoo Finance<\/a><\/strong><\/em><\/p>\n

\u201cWe saw a lot of positive savings behaviors among employees,\u201d Mike Shamrell, vice president of workplace thought leadership at Fidelity Investments, told Yahoo Finance.<\/p>\n

\u201cIt was really encouraging to see that despite a lot of things going on, and economic ups and downs, people continued to save and didn\u2019t pull back, or make a lot of changes to their asset allocation,\u201d he said. \u201cAs a result, we saw the individual 401(k) savings rate increase to the highest level that we’ve seen.\u201d<\/p>\n

To break it down, the average employee contribution rate was 9.5%, and the employer contribution rate was 4.8%. This combined savings rate of 14.3%, up from 13.5% in 2020, is the closest it’s ever been to Fidelity’s suggested savings rate of 15%.<\/p>\n

\u201cFor years, the individual savings rate was stuck at 8%,\u201d Shamrell said.<\/p>\n

Overall, average 401(k) retirement account balances dropped 3% through the first three months of this year to an average of $127,100 from $131,700 at the end of 2024. This was the second-highest average on record for the firm and an 11% increase from the start of 2024.<\/p>\n

The data is based on 25,300 defined contribution plans at various companies across the country, covering 24.4 million participants.<\/p>\n

Read more:\u00a0<\/em>How much can you contribute to your 401(k) in 2025?<\/em><\/a><\/p>\n

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Pumping it up<\/strong><\/h2>\n

In the first quarter, 17.4% of people with 401(k) accounts at Fidelity increased their savings rate, while 5% decreased. Less than 1% stopped saving altogether.<\/p>\n

Surprisingly, only 6% changed their 401(k) asset allocation. Of those who did, about 3 in 10 moved into more conservative investments.<\/p>\n

There are two big drivers.<\/p>\n

First, automatic enrollment in employer-provided retirement accounts for new employees and auto-escalation each year keep the trains running through all kinds of uncertainty.<\/p>\n

More than 1 in 4 plans now offer employer-set automatic escalation, and 35% of plans default to automatically enrolled employees at a 5% contribution rate or higher, according to Fidelity data, with an annual 1% increase until reaching roughly 10% of pay.<\/p>\n

\u201cThe increasing use of auto escalation is a big factor in why we are seeing a gradual increase in the individual savings rate,\u201d Shamrell said.<\/p>\n<\/div>\n

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Employees, of course, can opt out, but rarely do.<\/p>\n

More than two-thirds of the individuals who increased their 401(k) contribution rate in the first quarter used the auto increase feature in their plan, according to Shamrell.<\/p>\n

The second big force helping retirement savers stay calm is the marvelous\u00a0target-date fund<\/a>.<\/p>\n

More than 6 in 10 Fidelity 401(k) participants had all of their savings in a target-date fund.<\/p>\n

\u201cThat number’s even higher among Gen Z \u2014 81% \u2014 as you can imagine, because they’re a generation where a lot of them have been automatically enrolled in these funds,\u201d Shamrell said.<\/p>\n

Nearly all 401(k) plan sponsors, including Fidelity, use target-date funds when they automatically enroll workers in a retirement plan.<\/p>\n

With a target-date retirement fund, you choose the year you\u2019d like to retire and buy a mutual fund with that year in its name (like Target 2044). The fund manager allocates your investment between stocks and bonds, typically made up of index funds, tweaking that to a more conservative mix as the target date nears.<\/p>\n

Target-date funds help 401(k) participants automatically rebalance when markets shift and as they near retirement age, and they go a long way in helping people navigate uncertain markets with some peace of mind knowing that their portfolios are well-diversified and designed for long-term investing for retirement.<\/p>\n

\u201cThey can really prevent people from going in and tinkering if they get worried,\u201d Shamrell said.<\/p>\n

Have a question about retirement? Personal finances? Anything career-related? Click here to drop Kerry Hannon a note.<\/em><\/strong><\/a><\/p>\n

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The pool of 401(k)-created millionaires dipped<\/strong><\/h2>\n

Reaching a million-dollar-plus balance was not such an easy ride. In the first quarter, 512,000 savers had at least $1 million in their 401(k), down from 537,000 at the end of last year.<\/p>\n

\u201cThe number of people who hit the millionaire milestone swings with the market, either up or down,\u201d Shamrell said. These millionaires make up a small percentage of Fidelity\u2019s 401(k) participants, he added.<\/p>\n

\u201cThat millionaire number, whether it’s a million-dollar lottery ticket or a million-dollar home, it just seems to be something people really view as aspirational. We\u2019re not saying that once you get to a million, you’re done. It’s one threshold to aim for in terms of your savings efforts.\u201d<\/p>\n

Who are these super savers? The average savings tenure across Fidelity\u2019s millionaire population is about 27 years, Shamrell said.<\/p>\n

\u201cLet’s think back to 27 years ago, that was 1998, and all the things that this population has seen \u2014 from the rise and fall of the dot-com to 9\/11, to the global housing crisis, to a global pandemic. They’re really great examples of staying the course. One of the main characteristics is that they save consistently,\u201d he said.<\/p>\n

And they save aggressively. Their average individual savings rate is about 17.6%. If you add in the employer match it totals 26.2%.<\/p>\n