Fidelity Investments reported that retirement account balances hit all-time highs during the second quarter, reflecting both strong market performance and consistent savings behavior among workers. The average 401(k) balance increased 13.1% year over year to $155,800, while the average individual retirement account balance rose 10% to $144,523. These gains were supported by recent stock market advances, with the Dow Jones Industrial Average up roughly 10% year to date and the Nasdaq Composite and S&P 500 each rising around 12%.
Contribution rates remained steady, with the average 401(k) contribution rate holding at 14.4% when combining employer and employee contributions, slightly below Fidelity’s recommended 15% annual savings benchmark. According to Fidelity officials, the combination of positive market performance with consistent savings rates produced these record balances.
However, data from Fidelity also indicated increased financial stress among workers. The share of workers with outstanding loans from their 401(k) plans rose to 19.5%, up from the previous year, with approximately 2.8% of workers taking out new loans during the second quarter. Additionally, hardship withdrawals increased to 3% from 2.6% year over year. Financial experts cited persistent inflation and rising costs for necessities including groceries, housing, utilities, and gasoline as contributing factors to workers tapping their retirement savings.
Certified financial planners and economists cautioned that accessing 401(k) funds before retirement should be a last resort. Early withdrawals or loans disrupt long-term retirement savings and diminish the benefits of compound interest. Experts also warned of potential behavioral patterns, noting that once workers begin using retirement accounts for daily expenses, they may be more likely to tap these funds repeatedly, further eroding retirement savings over time.
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