Retirement account balances climbed to all-time highs in the second quarter, according to data released by Fidelity Investments. The average 401(k) balance increased 13.1% from the prior year to $155,800, while average individual retirement account balances grew 10% year over year to $144,523.
Strong market performance drove much of the gains, with the Dow Jones Industrial Average rising approximately 10% year to date and both the Nasdaq Composite and S&P 500 gaining around 12%. Consistent savings contributions also supported the growth, with the average 401(k) contribution rate holding steady at 14.4%, near Fidelity’s recommended 15% annual savings benchmark.
However, data indicated that growing numbers of workers are accessing their retirement funds to meet immediate financial needs. The share of workers with outstanding 401(k) loans rose to 19.5%, with 2.8% taking out new loans in the second quarter. Additionally, hardship withdrawals increased year over year to 3% from 2.6%. Financial experts attributed this trend to persistent affordability challenges, with rising costs for groceries, gasoline, housing, utilities and transportation straining household budgets.
Experts cautioned that accessing retirement accounts prematurely carries significant long-term consequences. Withdrawals or loans disrupt the accumulation process and compound interest growth needed for retirement security. Financial advisors also noted a behavioral risk, as workers who tap their accounts for everyday expenses may become more likely to do so repeatedly, further compromising retirement readiness.
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