Despite recent market volatility, Americans’ retirement account balances increased in the second quarter of 2023, marking the third straight period of growth, according to the latest data by Fidelity Investments.
The average IRA balance grew to $113,800, a 5% increase from last quarter, and a 41% increase from 10 years ago, according to the report.
The average 401(k) balance jumped to $112,400, up 4% from the previous quarter, and a 39% increase from 10 years ago.
At the same time, the average 403(b) balance spiked to $102,400, up 5% from the previous quarter, and a 65% hike from 10 years ago.
“We are pleased to see a third straight quarter of positive gains for retirement savers as the market continues to improve and both employees and employers commit to establishing a strong financial future,” Kevin Barry, Fidelity Investments president of workplace investing, said in a statement. “As we begin to see improvements in market conditions, maintaining high contribution and savings rates is an essential component of improving one’s retirement readiness.”
Additionally, Americans could benefit by taking advantage of any available employer matches and staying committed to retirement savings.
“If your employer matches any portion of your retirement contributions, consider maxing out by contributing up to at least the match amount,” Fidelity said in its report. “This is considered part of your compensation package and is, in essence, free money.”
When combined with employer contributions, the average retirement account savings rate for the second quarter was 13.9%, according to the report. That rate is closely aligned to Fidelity’s recommended contribution rate of 15%.
But saving early and gradually increasing contribution rates as budgets allow can also help. In fact, Baby Boomers who’ve been saving in their 401(k) plan continuously since 2008 today have an average balance of $499,700.
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Many Gen Xers stopped saving for retirement
Despite overall signs of positive growth in retirement account balances, Gen X may be facing particular challenges.
More than half (64%) of Gen Xers said they stopped saving for retirement because they couldn’t afford to do so, according to a survey by Clever Real Estate.
Affording necessities has placed roadblocks in front of some Gen Xers’ retirement paths. In particular, about 35% of Gen Xers said they sacrificed or reduced retirement contributions to fund the basics and 26% reported doing so to pay credit card bills, the survey said. The majority of Gen X respondents (80%) said they carried some form of debt such as credit card balances, student loans or auto loans.
And many Gen Xers, especially those in the lower income quartile, don’t yet have enough saved for retirement, according to a report by the National Institute on Retirement Security (NIRS).
The top earners of Gen X hold nearly $250,000 on average in retirement savings, while the bottom quartile has $35,000, the NIRS reported. When looking at the median, the bottom quartile has $200 in retirement savings, and the second quartile holds $4,290, the NIRS said.
“Gen Xers are fast approaching retirement age, but the data indicate that the vast majority are not even close to having enough savings to retire,” NIRS Executive Director Dan Doonan said in a statement. “This really isn’t surprising given the terrible retirement hand that has been dealt to the latchkey generation. Most Gen Xers don’t have a pension plan, they’ve lived through multiple economic crises, wages aren’t keeping up with inflation, and costs are rising. The American Dream of retirement is going to be a nightmare for too many Gen Xers.”
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Secure 2.0 Act is in motion
Regardless of generation, the Secure 2.0 Act of 2022 was designed to improve the retirement plan industry for Americans in the coming years. Here are some of the legislation’s major changes at a glance:
“While SECURE 2.0 contains dozens of provisions, the highlights include increasing the age at which retirees must begin taking RMDs from IRA and 401(k) accounts, and changes to the size of catch-up contributions for older workers with workplace plans,” Fidelity said in a post. “Additional changes are meant to help younger people continue saving while paying off student debt, to make it easier to move accounts from employer to employer, and to enable people to save for emergencies within retirement accounts.”
In total, Secure 2.0 includes 92 provisions related to 401(k)s, IRAs and other savings vehicles, according to a post by the AARP.
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