Retired savers weathered the chaotic market slew in the first three months of the year in the first three months of the year, according to quarterly analysis by Fidelity Investments.
Although their average 401(k), 403(b) and IRA balances fell, mainly due to market volatility, the savings rate remained consistent, with the average 401(k) savings rate rising to a record 14.3%.
“We see a lot of positive savings behaviors among employees,” Mike Shamrell, vice president of workplace thought leadership for Fidelity Investments, told Yahoo Finance.
“It’s really encouraging despite a lot of things happening, the economy is up and down, and people continue to save, not back down, or make a lot of changes to their asset allocation,” he said. “So we’re seeing an individual 401(k) savings rate rise to the highest level we’ve seen.”
To break it down, the average employee contribution rate was 9.5% and the employer contribution rate was 4.8%. This total savings rate is 14.3%, up from 13.5% in 2020, and is the closest Fidelity savings rate ever to 15%.
"For years, individual savings rates have been trapped at 8 percent," Shamrell said.
Overall, the average 401(k) retirement account balance fell from $131,700 at the end of 2024 to an average of $127,100 in the first three months of the year. This is the company's second-highest average, up 11% from the beginning of 2024.
The data is based on 25,300 defined donation programs from companies across the country, covering 24.4 million participants.
Read more: How much can you contribute to 401(k) in 2025?
In the first quarter, 17.4% of the 401(k) account wealthy population increased the savings rate, while 5% decreased. Less than 1% of people stop saving completely.
Surprisingly, only 6% changed its 401(k) asset allocation. Of those who do, about one in ten enter more conservative investments.
There are two big driving forces.
First, automatically register an employer-provided retirement account, providing automatic estimates for new employees every year, allowing the train to continue through various uncertainties.
According to Fidelity Data, more than 1 plan now offers an automatic upgrade set by employers, while 35% plans default to include the employee at a rate of 5% or higher at a contribution rate of 5% or higher, and according to Fidelity Data, an increase of 1% per year until approximately 10% of salary is reached.
"The increasing use of automatic upgrades is an important factor in why we are seeing a gradual increase in personal savings rates," Shamrell said.
Employees can certainly opt out, but rarely do it.
According to Shamrell, more than two-thirds of individuals who increased their 401(k) contribution rate use the planned auto-add feature.
The second biggest force to help retired savers stay calm is the wonderful target date fund.
Six out of 10 loyalty 401(k) participants provided all savings for the target date.
"As you can imagine, in Generation Z (81%), that number is even higher because they are the generation that many of them automatically join these funds," Shamrell said.
Almost all 401(k) plan sponsors (including fidelity) use target date funds when automatically recruiting workers to retirement plans.
With the Target Date Pension Fund, you can choose the year you want to retire and purchase a mutual fund in the name of that year (e.g. Target 2044). The fund manager allocates your investments between stocks and bonds, usually composed of index funds, which adjusts to a more conservative combination as the target date approaches.
Target date funds help 401(k) participants automatically rebalance when market changes and approach retirement age, and in helping people appreciate uncertain markets in uncertain markets, they know that there are many changes in their portfolios and are designed for long-term investments.
"If you worry, they can really prevent people from going in and tinkering," Shamrell said.
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It is not easy to reach a balance of more than one million dollars. In the first quarter, there were at least $1 million of the 401(k) of 512,000 savers, down from $537,000 late last year.
"The number of people experiencing a millionaire milestone in the market, whether up or down," Shamrell said.
He added that these millionaires account for a small percentage of Fidelity 401(k) participants.
"That millionaire figure, whether it's a million dollar lottery or a million dollar home, it seems like something people really think of ambition. We're not saying once you get to a million you're done. It's a goal in terms of your savings work."
Who are these super savers? Shamrell said the average savings term for the Fidelity millionaire population is about 27 years.
"Let's think back 27 years ago in 1998, from the rise and fall of the Internet to 9/11, to the global housing crisis, to the global pandemic. They are indeed examples of what remains. One of the main characteristics is that they consistently save," he said.
They will actively save. Their average savings rate is about 17.6%. If the employer match is added, the total is 26.2%.
Kerry Hannon is a senior columnist at Yahoo Finance. She is a professional and retirement strategist and the author of 14 books, including the upcoming “Retirement Bites: X Gen X’s Guide to Securing Your Financial Future,“ “In control over 50: How to succeed in the new world of work” and “never be too old to get rich”. Follow her Bruceky.
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