The average 401(k) balance tumbled 10% in the fourth quarter of 2018 to $95,600 from a record high of $106,500 the previous quarter, according to Fidelity Investments. The year-over-year average balance was down just over 8% from $104,300 in the fourth quarter of 2017.
The data come from Fidelity’s quarterly analysis of retirement savings account balances, contributions, and savings behavior from among more than 30 million retirement accounts.
The average individual retirement account (IRA) balance during the fourth quarter fell approximately 11% to $98,400 from the previous quarter, and roughly 7.5% from $106,300 at the same time the previous year. The average tax exempt/403(b) account balance dropped 10% during the quarter to $78,700, and was down 7.5% from the year-ago period.
Despite market volatility, investors did not make any major changes to their 401(k) investments, according to Fidelity. Only 5.6% of 401(k) investors made a change to their asset allocation in the fourth quarter, including investors who have their savings in a target date fund or managed account. Of those investors who made a change to their 401(k) asset allocation, 67.4% only made one change during the quarter. And as of the fourth quarter, 50.6% of 401(k) participants were 100% invested in a target date fund.
“For many retirement savers, the recent market volatility is the most significant they have seen in several years—and for some of our younger investors, 2018 was the first time in their careers they have experienced a significant down market,” Kevin Barry, president of workplace investing at Fidelity Investments, said in a release. “Market corrections like we experienced in Q4 can make investors anxious—however, the good news is that we didn’t see that type of behavior amongst our 30 million retirement savers.”
More than 98% of 401(k) savers continued to regularly contribute to their retirement plan in 2018. And in the fourth quarter alone, the percentage increased to more than 99%, which was the highest quarterly percentage since the first quarter of 2011. The average 401(k) contribution in 2018 was $6,850, which equals a record high, and the average total IRA contribution in 2018 was $4,200, a 10% increase over the average total contribution for 2017.
The analysis also showed that there were fewer 401(k) and IRA millionaires by the end of the fourth quarter, as the number of people with $1 million or more in their 401(k) dropped to 133,800, while the number of IRA millionaires decreased to 138,800. It also found that fewer workers tapped into their savings as 401(k) loan levels dropped to a 10-year low. The percentage of workers with an outstanding loan from their 401(k) fell to 20.3%, and the percentage of workers initiating a new 401(k) loan declined to 9.4% in 2018. Both were the lowest 12-month percentages in more than 10 years.