Market Gains Drive Retirement Balances Higher But Too Much Stock Could Put Savings at Risk, Fidelity Analysis Finds

BOSTON - Fidelity Investments® today released its quarterly retirement savings analysis of its 401(k) accounts and Individual Retirement Accounts (IRAs). The analysis4 reveals:

  • Account balances. The average 401(k) balance dipped slightly at the end of Q2 to $91,100 from $91,800 at the end of Q1, and is nearly flat from the end of Q2 2014 average of $91,000. However, IRA balances increased to $96,300 at the end of Q2, up from $94,000 at the end of Q1 and $92,500 one year ago.
  • Contributions. Individuals and their employers remain committed to saving in 401(k) accounts and total contribution rates are reaching record levels. The average 12-month total savings amount, which combines employee contributions and employer contributions (such as a company match), increased from $9,840 at the end of Q1 to $10,180 at the end of Q2 – the first time the total savings amount has surpassed $10,000. The average IRA contribution dipped to $2,690 at the end of Q2 from $3,150 at the end of Q1, primarily due to the significant number of people making contributions to their IRA in Q1 to meet the IRS tax deadline.
  • 401(k) loans. While average balances have increased over the past several years, higher savings balances could be contributing to increased loan activity among 401(k) account holders. While the percentage of people initiating a loan (10.1 percent) and the percentage of loans outstanding (21.9 percent) have remained steady over the last several quarters, the average 401(k) loan amount continues to increase. For the previous 12 months, the average loan amount reached $9,720 at the end of Q2, up from $9,630 at the end of last quarter and $9,500 a year ago.

Many Boomers May Be Top-Heavy on Stocks, Increasing Their Risk

While a rising stock market is one reason the average 401(k) balance is up 50 percent in the last five years, this has led to an increased percentage of equities2 within many 401(k) accounts, which can add increased exposure to the negative impact of a market downturn.

Many older 401(k) account holders, including Baby Boomers close to retirement age, had stock allocations higher than those recommended3 for their age group. Fidelity compared average asset allocations to an age-based target date fund and found 18 percent of people 50-54 had a stock allocation at least 10 percentage points or higher than recommended, and for people ages 55-59, that figure increased to 27 percent.

An additional 11 percent of people ages 50-54 had 100 percent of their 401(k) assets in stocks, while 10 percent of people ages 55-59 had all of their 401(k) assets in stocks.

"One thing we learned from the last recession is that having too much stock, based on your target retirement age, in your retirement account can expose your savings to unnecessary risk – it's the hidden danger that many workers are unaware of. This is especially true among workers nearing retirement, who should be taking steps to protect what they've worked so hard to save," said Jim MacDonald, president, Workplace Investing, Fidelity Investments. "Asset allocation is an important part of any retirement strategy. While you shouldn't try to time the market, checking your account on a regular basis and ensuring your portfolio is properly balanced can ensure your allocation stays on track."

To help people keep their retirement savings asset allocation on track, Fidelity is teaming with thousands of employers across the country on a campaign4 that targets 401(k) account holders who may want to rebalance their asset allocation. People are encouraged to contact a Fidelity representative for guidance or to use Fidelity's online tools for information on how to help them manage their 401(k) assets. Since the campaign launched in early July, more than 50,000 people have responded, and of those, more than half have taken action to address their asset allocation, either by accessing online research, leveraging planning tools and calculators, or making changes to their asset allocation.

"Now is the time to act and be aware of the tools available to help you manage and protect your 401(k) savings," added MacDonald. "We encourage people to take steps to ensure a confident savings and investment plan, and Fidelity has a variety of ways to help people keep their asset allocation on track."

About Fidelity Investments

Fidelity's goal is to make financial expertise broadly accessible and effective in helping people live the lives they want. With assets under administration of $5.2 trillion, including managed assets of $2.1 trillion as of June 30, 2015, we focus on meeting the unique needs of a diverse set of customers: helping more than 24 million people invest their own life savings, nearly 20,000 businesses manage employee benefit programs, as well as providing nearly 10,000 advisory firms with technology solutions to invest their own clients' money. Privately held for nearly 70 years, Fidelity employs 41,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit https://www.fidelity.com/about.

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