Long-term financial goals are losing their priority status to immediate need as millions of Americans grapple with the cost of living.
Retirement savings may be an essential pillar of financial planning but new stats from Fidelity Investments show that average account balances decreased in the third quarter of 2023, while withdrawals and loans increased.
The firm’s analysis of 45 million individual retirement accounts and 401(k) and 403(b) accounts found that the average balances in Q3 2023 were:
For IRAs and 401(k)s, average balances were down 4% from the previous quarter, while the average for 403(b) accounts was down 5%.
Hardship withdrawals increased from 1.8% in the second quarter to 2.3% in the third quarter, mostly as a result of avoiding foreclosure or eviction and medical expenses.
While there was little change in the share of 401(k) participants taking out loans from their accounts in the third quarter compared to the previous quarter, there was a slight rise year-over-year, and 17.6% had a loan outstanding, up from 17.2% in Q2 2023, and 16.8% in Q3 2022.
Of those eligible to do so, 3.2% of participants took an in-service withdrawal rather than a loan, up from 2.7% from a year ago.
A recent study suggested that some behavioral traits make clients more likely to contribute to retirement savings than others.
Despite the negative overtones of the most recent quarter’s retirement savings behavior, the overall picture is optimistic.
When compared with year-ago data, IRAs were up 8% while there was an 11% rise for 401(k) and 403(b) accounts. Looking back 10 years, balances were up almost 30% for IRA and 401(k) accounts and up by 46% for 403(b) accounts.
The total savings rate for both employer and employeeRead more on investmentnews.com