Despite the economic uncertainty caused by the pandemic—or possibly because of it—US retirement account balances rose to record levels during the fourth quarter of 2020, as reported by Fidelity Investments. The firm said individual contributions to individual retirement accounts (IRA), as well as 401(k) and 403(b) retirement accounts remained strong during the last three months of the year.
“The stock market results in Q4 played a part in boosting average account balances to record levels,” Kevin Barry, president of workplace investing at Fidelity Investments, said in a statement. “But we’re encouraged to see how positive saving behaviors among our retirement investors also contributed to increased balances.”
The average 401(k) balance ended the quarter at $121,500, an 11% increase from the previous quarter, and an 8% rise from the year-earlier quarter. Meanwhile, the average 403(b) account balance grew to a record $106,100, up 10% from the third quarter, and 14% from the fourth quarter of 2019.
And the average IRA balance gained 9% quarter-on-quarter, and 11% year-on-year to reach $128,100. The number of IRAs receiving a contribution increased 35% in 2020, while the average contribution per account increased 5%. The percentage of contributions to Roth IRAs also continues to increase, rising to 58.7% of all IRA contributions in 2020.
Savings rates also rose to record levels for individuals’ workplace savings accounts, as average savings rates for 401(k) and 403(b) accounts topped out at 9.1% and 7.3%, respectively. And when employer contributions are added, the total savings rate for 401(k) accounts was 13.5%, while the total savings rate for 403(b) accounts was 11%.
Fidelity’s analysis also found that women are “saving more for retirement than ever before,” with their average 401(k) savings rate rising to a record 9% from 8.7% the previous year. At the same time, women’s savings rates for 403(b) plans also hit a record, increasing to 7.6% from 6.2% in the fourth quarter of 2019. Additionally, the total savings rate for women when combined with employer contributions was 13.3% for 401(k) plans and 11.4% for women in 403(b) plans. And for women in IRAs, the average contribution was up 4% from 2019.
“Despite the unprecedented challenges posed by the pandemic, we continued to see women investors stay engaged and continue to take the steps to keep their retirement savings moving in the right direction,” Barry said.