401(k) balances are going up, despite the economic challenges

New York (CNN) Despite skyrocketing prices, and endless talk of potential recessions and bear markets, 401(k) participants I was able to keep their savings rates relatively flat in the fourth quarter of last year, helping to stabilize their nest eggs and increase their average total balances.

That’s according to new data from Fidelity Investments, one of the largest providers of workplace retirement plans, which collectively account for $2.8 trillion in assets on its platform.

“Fortunately, the data shows that retired savers understand the importance of saving for the long term, despite the market shift. We’re encouraged to see people navigate current volatility and continue to make smart choices for their future,” said Kevin Barry, head of workplace investment at Fidelity.

Barry means that the average 401(k) savings rate (including employee contributions and employer matches) has remained roughly flat at 13.7%, down from 13.8% in the third quarter and 13.9% in the second quarter.

Among generations in the workforce, Baby Boomers had the highest savings rate as a percentage of their income (16.5%). The smallest group — Generation Z workers — saved 10.2%.

One-third of respondents have actually increased their contribution rate over the past year, according to Fidelity. But the median rate among this group is still very low – at just 2.6%.

Meanwhile, the average 401(k) balance in plans managed by Fidelity rose 7% from the third quarter, to $103,900. However, thanks to poor performance in both stocks and bonds last year, the average is still 23% below the $135,600 recorded at the end of 2021.

On the one hand 401(k) loansThe percentage of active plan participants with the privileged remained at 16.7%. This is down from 17% a year ago and 21% from five years ago, Fidelity said.

The average loan amount outstanding was $10,200. Among the different age groups, Gen Xers had the highest average, followed by Baby Boomers. And even though they were just starting out in their careers and didn’t have much time to accumulate savings, 3.2% of Gen Z workers also had a 401(k) loan, but their median amount ($3,000) was the lowest among all age groups.

Hardship withdrawals From 401(k)s—money taken out when a participant is under financial stress of some kind (for example, to prevent eviction, pay funeral expenses, or to cover a near-term education bill)—it was 2.4% for the year, up from 1.9% in the year. 2021. The average amount withheld was $2,200. Unlike a 401(k) loan, the hardship withdrawal does not have to be repaid, and will be taxed. Additionally, in some cases you may be subject to a 10% fine if you are under 59-1/2.

the The new retirement law, Secure 2.0includes a provision that makes it easier and less expensive for 401(k) participants to withdraw money from their account for emergency needs of up to $1,000 per year.

Aside from workplace retirement plans, Fidelity reports a 10.2% year-over-year increase in the number of IRAs on its platform, noting that 61% of IRA contributions made in the fourth quarter of last year went into effect. dung IRAs.