7 New 401(k), IRA Stats for Q3: Fidelity

2. Average 401(k) and 403(b) balances fell in Q3, too, but yearly growth was stronger.

Fidelity’s data shows the average 401(k) balance decreased to $107,700 during the quarter, which is down 4% from the second quarter.

Despite the quarterly drop, this amount represents an 11% increase from a year ago and a 27% increase from 10 years ago.

For 403(b) accounts, the average account balance decreased to $97,200, which is down 5% from the last quarter but up 11% from last year. This increase represents a 46% jump from 10 years ago.

3. Total savings rates have remained steady.

According to Fidelity, the total savings rate for the third quarter across both employee and employer 401(k) contributions was 13.9%, which is consistent with Q2 and up slightly from a year ago.

The data shows baby boomers in the workforce continue to save at the highest levels, with a combined average employer and employee contribution of 16.7%.

4. Gen Z investors are eagerly embracing the IRA.

Fidelity’s data shows the total number of IRAs on the firm’s platform rose to 14.6 million, an 11% jump over this time last year, while total assets also increased 19% in the last year.

Fidelity says Gen Z investors continue to make "huge strides" with retirement savings, with a 63% increase in the number of IRAs year over year and overall dollar contributions increasing 51%.

The third quarter also saw a 69% increase in IRA ownership for women in this age bracket.

5. The Roth IRA is the most popular retail retirement savings vehicle.

Across generations, Fidelity finds, Roth IRAs continue to be the preferred retail retirement savings vehicle, with 61.2% of IRA contributions going to Roth accounts.

Average long-term balances fell in Q3 but grew in the last decade.

As the data shows, those account owners who have been invested in their account for at least 5, 10 and 15 continuous years saw their balances drop in the prior quarter, but their long-term consistency has nonetheless paid off handsomely.

For example, the balance for Gen Z workers who have been in their 401(k) plan for five years straight topped $29,000 in Q3.

6. Higher hardship withdrawals cause concern.

The Fidelity report warns that one "potential cloud on the horizon" is the fact that, despite consistent contribution levels, many individuals increasingly have been tapping their retirement savings through hardship withdrawals.

According to Fidelity, the increasing use of hardship withdrawals and loans underscores the need to help retirement savers develop emergency savings, which Fidelity has found to be the top savings goal among employees after retirement.

Specifically, 2.3% of workers took a hardship withdrawal in the prior quarter, up from 1.8% in the year-ago quarter. The top two reasons for this uptick were avoiding foreclosure/eviction and medical expenses.

7. Inflation pressures are also driving higher loan activity.

The Fidelity data further shows inflation and cost of living pressures have resulted in increased loan activity over the last 18 months.

In Q3, 2.8% of participants took a loan from their 401(k), which is flat from Q2 and up from 2.4% in Q3 2022.