Employers’ goals could be derailed by resignations, but member savings remain on track
Although workers are changing jobs or leaving the workforce in record numbers during the Great Resignation, their retirement savings remain on track.
“Despite a variety of financial headwinds in 2021, including continued market uncertainty and the changing employment landscape, investors did not let events derail their efforts and continued to remain focused on the fundamentals of retirement savings,” said Kevin Barry, president of workplace investing at Fidelity Investments.
“By making regular contributions to retirement accounts, not cashing out their savings when they change jobs, and taking advantage of employer contributions, individuals have been able to keep their savings on track as they approach 2022.”
Fidelity’s analysis of more than 35 million retirement accounts in Q4 2021 revealed several positive trends:
Retirement account balances posted strong gains. The average IRA balance was $135,600, down slightly from the previous quarter, but up 6% from the same period a year earlier. The average 401(k) balance hit a record high of $130,700.
Double-digit growth in IRA accounts, led by Gen Z. The highest level of growth was seen among Gen Z investors, where the number of accounts increased by 146%.
More than a third of workers increased their 401(k) and 403(b) savings rates. A record 38% of individuals increased their 401(k) contributions in 2021, with an average increase of more than 3%. In addition, 34% of 403(b) savers increased their contribution rate. Employers continue to contribute to their employees’ retirement savings. By the end of 2021, 83% of workers had their employer contribute in addition to their own 401(k) contributions, with the average employer contribution reaching $4,080.
Workers are focused on saving for retirement, even though many are changing jobs. Positive worker behavior, combined with increasingly popular 401(k) plan features, may mitigate any noticeable impact on American workers’ retirement savings.
Workers do not cash out their 401(k) savings when they leave their jobs. Nearly a quarter transferred their savings to an IRA, 15% transferred their savings to their new employer’s 401(k) or 403(b) plan, and 18% decided to leave their savings with their former employer.
A growing percentage of employers are automatically enrolling new employees in 401(k) plans and at a higher savings rate. More than a third of plans that use auto-enrollment will enroll new employees at a contribution rate of 5% or more, up from 28% of plans five years ago.
Once employees are automatically enrolled in their 401(k) plan, they generally stay. Less than 10% of employees who are automatically enrolled in their 401(k) plan opt out.