Inflation pressures not stopping retirement savers, Fidelity says

Fidelity’s latest trend analysis shows economic uncertainty heightening anxiety among workers worldwide even as they continue to save for retirement.

According to Fidelity’s recently released year-end 2022 analysis of savings behaviors and account balances, nearly three in four (74%) workers across the globe point to the cost of living and rising inflation as the leading cause of stress in their lives. That said, nearly all the respondents (95%) say being financially comfortable in retirement is a long-term goal.

The survey, which analyzed more than 43.4 million Fidelity individual retirement accounts and 401(k) and 403(b) accounts, showed total 401(k) savings rates remained steady last year, while the number of IRAs on Fidelity’s platform continued to increase, and the portion of employees with 401(k) loans at the end of 2022 remained low for a seventh consecutive quarter.

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

Barry addressed the rough market environment as well, adding that he was “encouraged to see people look past the current volatility and continue to make smart choices for their future.”

Fidelity’s analysis showed average retirement account balances increasing at the end of the fourth quarter from the third quarter. The average Fidelity IRA balance was $104,000 in the fourth quarter, a 2% increase from the previous quarter and up 36% from 10 years ago, the report said. The average 401(k) balance rose to $103,900 in the fourth quarter, up 7% from the third quarter and up 34% from 10 years ago. 

Generationally speaking, Gen Z 401(k) savers, who are heavily invested in target-date funds (to the tune of 84%), saw their average account balances increase by 23% over the previous quarter, the most of any group. Gen Z account balances were also up 14% from the fourth quarter of 2021, which makes them the only group that had positive growth over the last year, the report said. 

The report also showed Gen Z making major strides with retirement savings, opening 71% more IRA accounts compared to the fourth quarter of 2021. By comparison, millennial accounts increased by 22% since last year. Breaking it down by gender, the study said IRA account growth for females saw a year-over-year increase of 74% for Gen Z and 23% for millennials.

Finally, the Fidelity analysis showed outstanding 401(k) loans and average loan amounts continue to decline, with 401(k) loans matching the lowest percentage on record. The percentage of participants with a loan outstanding remained at 16.7% in the fourth quarter, down from 17% a year earlier and 21% five year earlier, according to Fidelity.