December 3, 2022

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Stocks have been scrapped this year, but people are still contributing to their retirement accounts

2 min read

Stocks and bonds have been volatile and bearish this year in an economy characterized by high inflation and rising interest rates. But that hasn’t deterred most retirement savers, especially the youngest.

401(k) participants held their savings contribution rates and portfolio allocations relatively flat for the third quarter, according to new data from Fidelity Investments. And GenZers have actually increased their contributions.

By the end of the third quarter, the S&P 500 had fallen 25% on the year. The Nasdaq was down 33%. And the S&P US aggregate bond index lost about 13%.

So it’s not surprising 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. That’s 6% down from the second quarter and 23% down from a year ago.

But the average savings rate among 401(k) participants, meanwhile, has remained relatively constant at 13.8%, which includes both employee and employer contributions. That’s a fraction down from Q2’s 13.9% and Q1’s 14%.

Meanwhile, GenZers in the workplace — those roughly aged 22 to 25 — increased their savings rates from 10% to 10.3%. That could explain why the youngest generation of today’s employees saw their bank balances up 1.2% compared to the second quarter, despite the horrific market performance.

Looking at the gender gap, men saved slightly more than women (14.5% vs. 13.5%). And in terms of age, Boomers saved the most (16.5%) near retirement.

Fidelity noted that allocations also remained fairly stable, with only 4.5% of 401(k) and 403(b) plan participants choosing to change in the third quarter. The majority of those who did so made only one change, and only 29% of them chose to invest more conservatively.

Despite the volatility in markets and the economy this year, “retirement savers have made a wise choice to avoid the drama and continue to make wise long-term decisions,” said Kevin Barry, president of workplace investing at Fidelity Investments.

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