Retirement Savings Hit Record Amid Pandemic Uncertainty
During a pandemic year that wreaked havoc on people’s finances, many workers—even those who faced employment instability—contributed to retirement plans at a record rate, data from Fidelity Investments show.
Overall, the average 401(k) contribution rate edged up to 9.1% of the worker’s salary in the final quarter of last year from 8.9% for the same period in 2019 and 9% from the previous quarter, Fidelity Investments’ latest quarterly analysis of retirement savings trends showed on Thursday. The analysis was based on more than 30 million total retirement participants as of Dec. 31.
The average defined contribution plan total saving rates, including both employee and employer contributions, increased to 13.5% from 13.1% in 2018, it said.
An uptick in contribution rates along with buoyant stock markets led to record average retirement account balances in the last quarter of 2020, Fidelity data show. This despite 1.6 million people making withdrawals from their retirement accounts under the CARES Act, starting in March until the end of 2020, with distributions trending slightly higher in December.
Women, who were among those hardest hit by the pandemic, took a greater interest in managing their money last year as they were deciding whether to drop out of the workforce or cut their hours during the pandemic.
The last quarter of 2020 reflected this movement. In that time, Fidelity said it saw a record 9% 401(k) savings rate among women, up from 8.7% in the same period a year ago.
And despite all the recent publicity of young adults trading individual stocks on zero commission apps like Robinhood, Fidelity said there were quite a few who opted to save for their silver years. In 2020, it said about 80,000 Gen Zers joined the company’s 401(k) platform, bringing that total to more than 800,000.
“This is now a generation that has some decent representation in the workforce, and we should start to pay attention to. They are quickly becoming the 'young investors' of the financial space,” Eliza Badeau, Fidelity’s vice president of Thought Leadership, said.