Retirement accounts are hit by inflation, but investors stay the course

It was a tough second quarter for many Americans who saw their retirement accounts take a hit as inflation rattled the stock market.

However, new research shows that most investors are still committed to the long term despite unease about volatility.

Fidelity Investment’s latest second-quarter 2022 retirement analysis, released Wednesday and viewed in advance by FOX Business, shows that while anxiety is high among American retirement savers, people are overwhelmingly staying the course toward retirement. building long-term wealth.

A trader looks at his screen on the floor of the New York Stock Exchange. (REUTERS/Brendan McDermid/Reuters Photos)

The mutual fund giant found that the average 401(k) balance fell to $103,800 in the second quarter, down 20% from the same period a year ago and 15% lower than in the first quarter of this year.

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But the data also points to several encouraging trends that indicate investors have continued to take positive steps to save for retirement.

Fidelity’s survey found Individual Retirement Account (IRA) savings have grown by double digits since the second quarter of 2021, with account growth striking among young women with a year-over-year increase. another 92% for Gen Z women and 24% for Gen Y.

The total savings rate also remained high at 13.9%, which is close to Fidelity’s suggested savings rate of 15%.

New York Stock Exchange

People walk in front of the New York Stock Exchange on July 25, 2022 in New York City. (Spencer Platt/Getty Images/Getty Images)

There was a drop in both 401(k) loans initiated and the percentage of workers with an outstanding loan. Only 2.4% of respondents took out a loan in the second quarter, and the percentage of those with an outstanding loan fell to 16.7%, from 18.9% in the same quarter of 2020, at the start of the pandemic. of COVID-19.

The study also showed that investors resisted the urge to panic due to market dips and turns.

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Fidelity reported that the majority of 401(k) and 403(b) savers made no changes to their allocations during the second quarter, and of those that did, 85% made only changes. only one. The main change made by respondents was to shift savings towards more conservative investments.

Michael Shamrell, vice president of thought leadership at Fidelity, says the results are a positive sign.

loyalty

New research from Fidelity Investments shows that retirement savers stayed the course during the second quarter despite market volatility. (Alex Tai/SOPA Images/LightRocket/Getty Images)

“We try to encourage people to take a long-term approach to retirement savings, so it’s great to see that the majority of retirement savers have stayed the course and haven’t made any changes due to market uncertainty in the second quarter,” Shamrell told FOX Business.

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“Even for people approaching retirement, it’s important to remember that your savings may need to last 15, 20, 25 years after you retire. So you want to continue to take a long-term approach and not make any changes. based on short-term market oscillations.”

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