Fidelity® Q4 2020 Pension Analysis: Despite ongoing economic uncertainty as a result of the pandemic, contributions to retirement accounts remained strong and helped bring the account balance to record levels

BOSTON–(BUSINESS WIRE) – Fidelity Investments®, a leader in workplace benefits and America’s leading IRA provider1, today released its quarterly analysis of trends in retirement assets, including balances, contributions and savings in more than 30 million IRA, 401 (k) and 403 (b) Retirement Accounts.

Despite ongoing economic uncertainty, individual contributions to all three retirement account platforms remained strong in the fourth quarter, which helped push average retirement account balances to record levels for the quarter. While the ongoing financial challenges caused by the global pandemic resulted in a slight increase in the number of withdrawals made under the CARES Act in the fourth quarter, the amount withdrawn was in line with the withdrawals made at the beginning of 2020.

“Fourth quarter results helped push average account balances to record levels. However, we are pleased to see how positive savings among our retirement investors also helped boost balances,” said Kevin Barry, President of Workplace Investing at Fidelity Investments. “A long-term approach to retirement savings that includes consistent savings efforts and asset allocation management can help investors weather the ups and downs of the economy. Last year has been a challenging one and we may still have difficult problems ahead of us. Therefore, it is more important than ever to stay on course and focus on the key steps that will help investors achieve their retirement goals. ”

Fidelity’s Q4 2020 analysis highlights include:

  • Retirement accounts hit record levels in the fourth quarter. The average IRA balance was $ 128,100, up 9% from last quarter and 11% more than the average balance of $ 115,400 a year ago. The average balance of 401 (k) increased to $ 121,500 in the fourth quarter, up 11% from the third quarter and 8% year over year. The average account balance of 403 (b) rose to a record $ 106,100, a 10% increase from last quarter and the first time the TEM average account balance has hit six digits.

Average retirement assets

Q4 2020

Q3 2020

Q4 2019

Q4 2010

IRA2

$ 128,100

$ 117,700

$ 115,400

$ 71,300

401 (k) 3

$ 121,500

$ 109,600

$ 112,300

$ 69,700

403 (b) 4

$ 106,100

$ 96,100

$ 93,100

$ 54,800

  • Employee savings rates reached record levels. Despite the ongoing financial uncertainty, individuals continued to save on their savings accounts at work. The average quarterly savings rate for 403 (b) accounts was 7.3% and the savings rate for 401 (k) accounts reached 9.1%, both record highs. When combined with employer contributions, the total savings rate (employee + employer contributions) for 403 (b) accounts was 11%, while the total savings rate for 401 (k) accounts was 13.5%. On Fidelity’s 401 (k) platform, one in three (33%) people increased their contribution rate sometime in 2020.

  • Generation Z5 workers are increasingly investing in their 401 (k). By the end of 2020, more than 800,000 Gen Z employees had joined Fidelity’s 401 (k) platform, a 10% increase from late 2019. That group’s average balance for the fourth quarter was $ 5,800, up 13.3% from the year-ago quarter.

  • New IRA accounts, contributions keep increasing. Individuals continued to use IRAs to save for retirement as the number of IRAs accounts receiving contributions increased 35% in 2020 and the average contribution per account increased 5% year over year. The percentage of contributions to Roth IRAs continues to rise, rising to 58.7% of all IRA contributions in 2020. As the number of IRAs increased beyond Millennials, Gen X and Baby Boomers, the number of IRAs under Gen Z. Investors5 nearly tripled in 2020 to more than 114,000 accounts.

  • Payouts under the CARES Act increased, but the payout amount remained constant. Withdrawals under the CARES law remained stable for most of 2020, although withdrawals increased slightly in December. From March to the end of 2020, 1.6 million people had withdrawn a CARES Act distribution from their retirement accounts, representing 6.3% of eligible employees on Fidelity’s workplace savings platform. The majority of people (59%) made a withdrawal in 2020 and the average total amount per withdrawal was $ 9,400 (the median amount per withdrawal was $ 2,500). While the Required Minimum Withdrawals (RMDs) were suspended in 2020 in the CARES Act, the RMD requirement was reintroduced for 2021, which means older investors (over 72 years of age) will have to make a distribution or face an IRS penalty have to.

Female investors are seeing significant progress in rising balances and contribution rates

Female investors, who make up around 40% of Fidelity’s 401 (k) platform and 70% of Fidelity’s 403 (b) platform, saw solid gains in 2020 despite some unique challenges resulting from the global pandemic. Recent Fidelity research6 found that nearly 4 in 10 working women (39%) are actively considering leaving the workforce or reducing their hours because of increased responsibility for caregiving. However, Fidelity’s Q4 analysis identified several positive aspects of women’s retirement efforts:

  • Increasing savings rates. Women are saving more than ever for retirement. The average savings rate of 401 (k) for women rose to a record 9% from 8.7% last year, while the 403 (b) savings rate for women rose to a record 7.6% from 6.2% in the fourth Quarter of 2019. Combined with employer contributions, the total savings rate (employee + employer contributions) rose to 13.3% for women who save in their 401 (k) and to 11.4% for women who save in their 403 (k ). b). Among female investors saving in an IRA, the average contribution amount in 2020 increased 4% compared to the average contribution amount in 2019.

  • The average 401 (k) balance for long-term savers exceeds a quarter of a million dollars. The average balance of 401 (k) for women who have been on their plan for 10 years increased from $ 249,200 last year to $ 297,900. As of the fourth quarter, there are 523,000 women on the Fidelity platform who have been on the same 401 (k) plan since the fourth quarter of 2011 when the average balance for that group was $ 61,800.

  • Increasing use of funds on the reference date. More than half (59.8%) of the women on Fidelity’s 401 (k) platform have all of their savings in a target futures fund, and the percentage rises to 71.4% of women on the 403 (b) platform from Fidelity. Target futures funds can offer a diversified mix of investments that can reduce the overall risk of their retirement account and are often used as a standard investment option for employers who automatically add employees to their workplace savings plan.

“Despite the unprecedented challenges posed by the pandemic, we continued to see female investors remain engaged and continue to take steps to steer their retirement savings in the right direction,” continued Barry.

For more information on Fidelity’s Q4 2020 analysis, please click here to access Fidelity’s Building Financial Futures overview, which provides additional details and insights into retirement trends and data.

About Fidelity Investments

Fidelity’s mission is to create better future prospects and achieve better results for the customers and companies we serve. With $ 9.8 trillion in assets under management including $ 3.8 trillion discretionary as of December 31, 2020, we are focused on serving the unique needs of a wide variety of clients: More than 35 million people To help invest their own savings, 22,000 companies manage employee benefit programs and provide investment and technology solutions to more than 13,500 institutions to invest their own clients’ money. Fidelity has been privately owned for more than 70 years and employs more than 47,000 people who are focused on the long-term success of our customers. For more information on Fidelity Investments, please visit https://www.fidelity.com/about-fidelity/our-company.

Remember that investing comes with risk. The value of your investment will fluctuate over time and you can make or lose money.

Target Date Funds are a mix of assets, stocks, bonds and other investments that automatically become more conservative as the fund approaches its target retirement date and beyond. The invested capital is not guaranteed.

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Fidelity Distributors Company LLC

500 Salem Street, Smithfield, RI 02917

National Financial Services LLC, member NYSE, SIPC

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967498.1.0

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1 Fidelity is America’s # 1 Leading IRA Provider, according to Cerulli Associates’ Cerulli Report – US Retirement Markets 2020, based on an industry survey of companies reporting all IRA assets under management for Q2 2020.

2 Fidelity IRA analysis based on 10.9 million Personal Investing IRA accounts as of December 31, 2020 and includes all IRAs except inherited IRAs, small business IRAs, and IRAs sold through the market sold by the advisor.

3 Analysis based on 23,300 defined contribution plans and 19 million participants as of December 31, 2020. These figures include the market sold by the advisor but not the tax-free market. The behavioral statistics exclude unqualified defined contribution plans and plans for Fidelity’s own employees.

4 Based on Fidelity analysis of 10,400 tax-exempt plans and 6.8 million subscribers as of December 31, 2020. Includes the average balance of all active plans for 5.1 million people employed in a tax-free market.

5 generations as defined by Pew Research as of January 2019: Gen Z (born 1997-2012), Millennials (1981-1996), Gen X (1965-1980) and Baby Boomers (1946-1964).

6 This study presents the results of a nationwide survey of 1,902 adults in the United States (951 men and 951 women) aged 18 and over who identify themselves as caregivers and who were employed as of January 1, 2020. This survey was conducted August 25 through September 4, 2020 by Engine Insights, an independent research firm not affiliated with Fidelity Investments. The results of this survey may not be representative of all adults who meet the same criteria as those interviewed for this study.

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