Stocks hitting new heights but many advisory clients struggle to catch up

The Dow 30, S&P 500 and Nasdaq are all dancing with record highs, which should have advisory clients doing celebratory shuffles of their own over the plump state of their retirement accounts.

Unfortunately, wealth managers are finding that’s not always the case. There are indeed those clients still intensely worried they might outlive their savings and others that may have missed the rally and want to catch up — and quick.

According to the Fidelity Investments Q2 2025 retirement analysis, 401(k) and 403(b) balances reached new record highs in Q2, climbing more than 8% year-over-year, the highest quarterly increase since Q4 2023. Total average 401(k) savings rates remained consistent with the prior quarter at 14.2%, a record high resulting from an employee contribution rate of 9.5% and an employer contribution rate of 4.8%.

The account balance rebound resulted in a related rebound in 401(k)-created millionaires, which reached an all-time high with 595,000 individuals in Q2, according to Fidelity.

Not all advisory clients saw their retirement accounts bounce back into seven-digit territory, however. They may have sat out the market rally for some reason, perhaps having been burned by stocks before, and feel the need to scramble to catch up.

The first step for those folks, according to Sydney Rutledge, financial advisor at Bogart Wealth, is to take their “financial house down to the studs” and create a budget.

“When you have a clear picture of your spending, it becomes easier to see how much you can realistically set aside for retirement and where you might be overspending. If you're able to cut back your spending, those dollars can be reallocated to retirement savings instead. When you feel behind on saving, every little bit counts,” Rutledge said. 

Frank Legan, partner and financial advisor at SEIA, believes the key to catching up is to “work backwards” and focus on “progress not perfection.”

“With the help of an advisor, they can assess how large of a nest egg is needed in retirement, then calculate how much needs to be saved annually at a reasonable rate of return. Don’t be discouraged. Take the first step,” Legan said.

Common 'catch up' mistakes

Andrew Jaffee, wealth management advisor at Apollon Wealth Management, said a common mistake when investors seek to “catch up” on their retirement saving is sacrificing flexibility or liquidity in pursuit of higher returns or optimal tax efficiency, which may lead to stress or short-sighted decisions.

“I help clients frame retirement planning as an exercise in balancing priorities — structuring their cash flow so near-term needs are met while steadily increasing savings — ensuring they maintain both stability today and momentum toward long-term goals,” Jaffee said.

Similarly, Bogart’s Rutledge said dialing up the risk on investment choices when facing a shortened time horizon is the most common risk she sees.

“It's easy to fall into the trap of ‘more risk equals more return,’ but this isn't always the answer to catching up on retirement savings if your risk tolerance or time horizon doesn't support a more aggressive portfolio. It's important to factor in the downsides of taking on more risk in your investments and not just focus on the potential upside,” Rutledge. 

Get clients back on track 

As for helping clients balance near-term spending needs with long-term retirement goals, Rutledge said her strategy is to take a “bucket approach” with client's overall asset allocation. Simplistically, this includes a short-term bucket, an intermediate term bucket, and a long-term bucket. The short-term bucket is where the near-term cash flow comes from.

“While a client is working, this bucket is their paycheck, and in retirement, it's lower risk investments like bonds. Then we turn to the intermediate term bucket, which is where we introduce more equity exposure while still focusing on moderate risk and growth. Lastly, the long-term bucket has the highest exposure of all the buckets to stocks and is typically where we see the most volatility, but also the most growth,” Rutledge said.

“This strategy allows to broaden market diversification across asset classes while also balancing near-term spending needs and long-term retirement goals,” Rutledge said.

Legan, meanwhile, believes it’s all about aligning client resources with their priorities.

“Balancing living comfortably now with decisions that don’t work against their future selves. Knowledge can lead to comfort,” Legan said.