Fidelity Investments’ quarterly analysis of retirement savings trends shows that average retirement account balances increased slightly in the third quarter despite economic uncertainty and market swings.
And although contributions to retirement accounts held steady overall, the financial challenges attendant on the coronavirus pandemic drove retirement account withdrawals under the CARES Act for those employees with an immediate financial need.
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“It’s encouraging to see average account balances increase slightly over the quarter and many individuals continuing to save in the face of the challenges posed by the pandemic, especially as many organizations, as well as their workers, are struggling in the current business environment,” Kevin Barry, president of Workplace Investing at Fidelity Investments, said in a statement.
“While the goal for retirement is to save and invest for the long-term, unexpected events can create a need to withdraw savings to cover near-term expenses.”
Fidelity’s analysis showed that retirement accounts increased slightly in the July-to-September period. The average IRA balance stood at $117,700, up 6% from the second quarter and 7% higher than the average balance a year ago of $110,200.
Likewise for average 401(k) and 403(b) balances:
- 401(k): $109,600, up 5% from Q2 and 4% from a year ago
- 403(b): $96,100, up 5% from Q2 and up 9% from a year ago
Employee and employer contributions remained steady, according to the analysis. The total savings rates for 401(k) and 403(b) accounts, which is the combined employer and employee contribution rate, remained consistent from the previous quarter.
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The average total savings rate for 403(b) accounts was 10.6%, and for 401(k) accounts 13.5%. Across Fidelity’s 401(k) platform, 89% of individuals left their contribution rate unchanged.
In the third quarter, investors across all generations continued to leverage Roth IRAs as a retirement savings vehicle, Fidelity reported. Year over year, 58% of all IRA contributions were to Roth IRAs, an increase of 54%.
Overall, the number of Roth IRAs that received a contribution grew by 35% over the past year. Total IRA contribution dollars, across all types of IRAs, increased by 37% during the same period.
According to the analysis, more individuals are saving in both an IRA and a 401(k). Upward of 2 million individuals on Fidelity’s platform save in both vehicles, an increase of 12.5% over third quarter 2019.
Among individuals saving in both their 401(k) and an IRA, the average combined balance rose to $333,700, an increase of 6% over the average balance of $312,000 a year ago. Millennials who save in both saw their average balance increase by 15.8% to $82,600.