Retirement savings up in a down market, says Fidelity

The good news is that more people saved for retirement in the first quarter of 2022. The bad news is that they lost money.

According to Fidelity’s first-quarter analysis of savings behaviors and account balances released today, the total 401(k) savings rate reached record levels in the first three months of the year and the number of IRAs on Fidelity's platform also rose.

On the flip side, the asset manager saw the average account balance decreasing as a result of the stock market's negative performance in the first three months of the year. For the first quarter, the Dow and S&P 500 closed down 4.6% and 4.9%, respectively, while the Nasdaq lost 9%.

The total savings rate, which reflects a combination of employee and employer 401(k) contributions, reached a record 14% in the first quarter, which is just below Fidelity's suggested savings rate of 15%.

The average IRA balance was $127,100 in Q1, down 2% from the year-ago period and a 6% decrease from the last quarter, according to Fidelity.

The average 401(k) balance dropped to $121,700 in the quarter, down 2% from a year ago and down 7% from the fourth quarter.

“While the market's performance does impact account balances in the near term, consistent contributions and having an appropriate asset allocation are just as important for a successful long-term retirement savings strategy,” Kevin Barry, president of workplace investing at Fidelity Investments, said in a statement. “Encouragingly, Fidelity's analysis found that the majority of retirement savers continued to demonstrate positive savings behavior, which will help keep them on track to reach their goals.”

Despite the volatility in the markets, just 5.6% of plan participants changed their allocations in their 401(k)s in the first quarter, up slightly from the 5.3% who did so in the fourth quarter, but below the 6.4% of participants who changed their allocations in the first quarter of last year.

Fidelity’s findings also showed the percentage of 401(k) savers initiating a new loan continued to trend downward for the third consecutive quarter, with only 2% of participants initiating a loan in Q1. The percentage of participants with a loan outstanding also continued to decline, dropping for the fourth consecutive quarter to 16.6%.

Finally, when it comes to long-term savers, Fidelity found that the 4.3 million individuals who have been in their company's 401(k) plan continuously for five years saw their average balance grow to $257,400 in Q1, up from $115,000 in Q1 2017.  For the 1.7 million individuals who have been saving in their 401(k) for 10 years, the balance has grown to $383,100, up from $85,100 in Q1 2012.

[More: Advisers caught between Fidelity, DOL on using crypto in 401(k)s]