In a year marked by high inflation and rising interest rates, stocks and bonds have had volatile, dismal results. However, most retiree savers especially the youngest ones haven’t let that stop them.
According to recent third quarter data from Fidelity Investments, 401(k) participants have mostly maintained their savings contribution rates and portfolio allocations. And GenZers have actually increased their contributions.
By the end of the third quarter, the S&P 500 was down 25% for the year. The Nasdaq had fallen 33%. And the S&P US aggregate bond index was off about 13%.
The average 401(k) account balance dropping to $97,200 in the third quarter is therefore not shocking, according to Fidelity, one of the nation’s top providers of workplace retirement plans. That’s down 6% from the second quarter and 23% from a year earlier.
However, the average savings rate among 401(k) participants, which takes into account both individual and company contributions, remained mostly constant at 13.8%. Only slightly less than the 13.9% and 14% reported in the second and first quarters, respectively.
Meanwhile GenZers in the workplace those roughly ages 22 to 25 increased their savings levels from 10% to 10.3%. That could explain why, despite poor market performance, the youngest generation of today’s employees actually saw their account balances climb 1.2% in comparison to the second quarter.
In terms of gender differences, men saved a bit more than women (14.5% versus 13.5%). And age wise, Boomers on the cusp of retirement saved the most (16.5%).
Allocations also held fairly steady, Fidelity found, with only 4.5% of 401(k) and 403(b) plan participants opting to make a change in the third quarter. The majority of those who did made just one change, and only 29% of them opted for a more conservative investment.
Despite the volatility in the markets and the economy this year, “Retirement savers have wisely chosen to avoid the drama and continue making smart choices for the long-term,” said Kevin Barry, president of Workplace Investing at Fidelity Investments.