Despite economic volatility, retirement account balances increased in the first quarter of 2023 for the second quarter in a row, according to the latest data by Fidelity Investments.
The average IRA balance increased to $109,000 in Q1 2023, a 5% rise from Q4 2022.
In addition, the average 401(k) balance jumped to $108,200, a 4% spike from Q4 2022 and the average 403(b) account balance rose to $97,900, up 6% from Q4 2022.
Plus, 401(k) contribution rates also increased in Q1 2023, Fidelity reported. Total 401(k) savings rates, which included employer-matching contributions, increased to 14%, up from 13.7% in Q4 2022. That brings 401(k) savings rates close to Fidelity’s recommended 15% contribution rates.
Even though the U.S. has been experiencing a time of stubborn inflation, record-high debt and rising interest rates, Americans' retirement readiness may be on a brighter path, Fidelity projected.
"With U.S. employers adding 1 million jobs to the economy in the first quarter of 2023, Americans appear to be refocusing on investing in their future," Fidelity said in its report.
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The average 401(k) employer matching contribution reached a record 4.8% in Q1, Fidelity said. Moreover, 85% of workers received some type of employer 401(k) contribution in Q1 and 78% of workers contributed enough money to their 401(k) to earn the full matching contribution from their employers.
Some employers provide eligible workers with matching contributions. Generally, these are additional contributions that employers make to their employee’s retirement plans calculated as a percentage of the contributions employees make, up to a certain limit, according to a post by Empower. But in some cases, employees need to contribute a certain amount to their retirement plans before they become eligible for matching contributions.
"We are encouraged to see positive gains for retirement savers, evidenced through rising account balances, improved savings rates and a commitment by employers – including small businesses – to help employees prepare for the future," Kevin Barry, president of Workplace Investing at Fidelity, said in a statement.
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Before retirement plan balances and contributions rates increased in Q1, the Secure 2.0 Act – which aims to rejuvenate the retirement plan system and help Americans maximize their savings – was signed into law in December 2022.
Here are some of its highlights:
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