Home Markets 401(k) Retirement Savings Account Balances to Drop in 2022, Fidelity Says

401(k) Retirement Savings Account Balances to Drop in 2022, Fidelity Says

by SuperiorInvest

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In a year marked by stiff economic headwinds, pension savers he paid the price.

Although average 401(k) balance rose in the fourth quarter of last year, balances at the end of 2022 fell 23% from a year earlier to $103,900, according to a new report from Fidelity Investments, the nation’s largest provider of 401(k) plans. The financial services company manages a total of more than 35 million retirement accounts.

Average individual retirement account the balance also fell 20% year-over-year to $104,000 in Q4 2022.

“With all the stresses in the world today, such as natural disasters and geopolitical events, Americans continue to face challenging times in our economy,” Kevin Barry, president of workplace investments at Fidelity, said in a statement Thursday.

Yet most pension savers continue to contribute, Fidelity found. The average 401(k) contribution rate, including employer and employee contributions, has mostly held steady at 13.7%, just below Fidelity’s suggested savings rate of 15%.

And despite continued inflationary pressures plaguing most households, only 16.7% of plan participants had an outstanding loan from their 401(k) at the end of the year, Fidelity said.

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Federal law allows workers to borrow up to 50% of their account balance, or $50,000, whichever is less. However, many financial experts similarly advise against tapping into a 401(k) before exhausting all other alternatives, because you’ll also lose out the power of compound interest.

Separate analysis by Vanguard also found that the average 401(k) balance. down 20% in 2022 to $112,572 and hardship withdrawals increased slightly.

At the same time, many households also used up emergency savings during 2022, further research shows.

According to a recent survey, at least one-third of adults of all ages and income levels say they are likely to have less savings now than they did a year ago. Bankrate report.

“It’s clear that a less-than-optimal economy, including historically high inflation coupled with rising interest rates, has taken a double toll on Americans,” said Mark Hamrick, chief economic analyst at Bankrate.

Many retirees expect to outlive their savings

A growing lack of savings has many older Americans worried about their retirement security. Nearly half, or 48%, of retired Americans believe they will outlive their savings, a separate report found Smart real estate found.

“Everyone is feeling financial pressure — there’s a lot of uncertainty in the markets and the economy,” said Mike Shamrell, vice president of thought leadership at Fidelity.

“However, many people understand that there will be ups and downs,” he added. “Don’t let short-term economic events derail your long-term retirement savings efforts.”

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