Stocks and bonds have been volatile and bearish this year in an economy marked by high inflation and rising interest rates. But that hasn’t deterred most retirement savers, especially younger ones.
401(k) participants have remained relatively stable in their savings contribution rates and portfolio allocations, according to new third-quarter data from Fidelity Investments. And GenZers have increased their contributions.
At the end of the third quarter, the S&P 500 was down 25% for the year. The Nasdaq had fallen 33%. And the aggregate S&P US bond index was down about 13%.
So it’s no surprise that the average 401(k) account balance fell to $97,200 in the third quarter, according to Fidelity, one of the nation’s leading providers of workplace retirement plans. This is 6% less than the second quarter and 23% less than the previous year.
But Meanwhile, the average savings rate among 401(k) participants remained relatively flat at 13.8%, which includes both employee and employer contributions. This is just a fraction of the 13.9% recorded in the second quarter and the 14% recorded in the first quarter.
Meanwhile, GenZers in the workplace, those aged roughly 22 to 25, increased their savings levels from 10% to 10.3%. This may explain why today’s younger generation of employees actually saw their account balances increase by 1.2% over the second quarter, despite the market’s terrible performance.
In terms of gender differences, men saved slightly more than women (14.5% versus 13.5%). And in terms of age, boomers on the cusp of retirement saved the most (16.5%).
Allocations also remained fairly steady, Fidelity found, with only 4.5% of 401(k) and 403(b) plan participants choosing to make a switch in the third quarter. Most of those who did only made one change, and only 29% opted for a more conservative investment.
Despite the volatility of markets and the economy this year, “retirement savers have wisely chosen to avoid the drama and continue to make smart long-term decisions,” said Kevin Barry, president of Workplace Investing at Fidelity Investments .