Fidelity Investments reported that retirement account balances achieved record levels in the second quarter, reflecting a recovery from earlier weakness in the year. The average 401(k) balance increased 13.1% year over year to $155,800, while the average individual retirement account balance grew 10% to $144,523, according to data published Thursday.
Market performance and consistent savings behavior supported the gains. Stock indices posted strong returns year to date, with the Dow Jones Industrial Average up roughly 10% and both the Nasdaq Composite and S&P 500 rising around 12%. Additionally, the average 401(k) contribution rate, combining employer and employee contributions, remained steady at 14.4%, approaching Fidelity’s recommended 15% annual savings benchmark.
However, indicators emerged that workers were increasingly accessing their retirement funds to address immediate financial pressures. The share of workers with outstanding 401(k) loans rose to 19.5%, up slightly from the previous year, with approximately 2.8% of workers taking new loans in the second quarter. Hardship withdrawals, which allow penalty-free access under circumstances such as foreclosure or health emergencies, increased to 3% from 2.6% year over year. Financial experts attributed this trend to ongoing affordability challenges driven by elevated costs for essential items including groceries, housing, utilities and transportation that have not been matched by wage growth for many households.
Advisors cautioned against using retirement accounts as a source of short-term cash. According to financial planners, withdrawals or loans disrupt long-term savings accumulation and the effects of compound interest, while establishing a behavioral pattern that can lead to repeated account tapping and further erosion of retirement savings.
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