The COVID-19 pandemic has caused us to think about many parts of our daily existence, such as our health, jobs, where we live, our financial future, education, travel and the simple handshake. But according to data released Tuesday, many savers are still financially on the path to retirement.
The combination of a stronger market, pandemic-related incentive opportunities and stable, disciplined investment in the second quarter gave Fidelity Investments reason for optimism. The company, which publishes its quarterly analyzes on pension trends of investors and employers each year, found double-digit increases in 401 (k) plans and individual pension accounts.
Read: COVID-19s Next Threat to Your 401 (k)
The company also said that 11% of employers reduced or eliminated their employer contributions to retirement plans, and about a third of them said they would reset it in the next year (another half said they would do so financially soon would possibly do). The average employer contribution in the second quarter was $ 1,080 – which roughly received three-quarters of the workers.
To look: This is how much you need to retire – and how COVID-19 will change that
Retirees have not stopped saving, Fidelity found. Nearly nine out of 10,401 (k) account holders (88%) participated in their accounts during the second quarter, which spanned April, May and June. Of those, 9% increased their contribution rates. Almost all (96%) of 403 (b) accountants maintained as increased their contribution rates in the same months.
The average balance of 401 (k) in the second quarter was $ 104,400, up 14% from the first quarter but down 2% from the same time last year. The average 403 (b) account balance was $ 91,100, a 17% increase over the last four years and also 3% up from the year before. The average individual retirement account was $ 111,500, a 13% increase from the first quarter and just over the $ 110,400 average at the same time last year.
See also: Is Suze Orman right? Is a traditional IRA really the wrong way to invest for retirement?
Millennials continued to favor Roth IRA accounts, which are funded with dollars after taxes but can be withdrawn tax-free. This generation created 23% more IRA accounts in the second quarter of 2020. Roth IRAs specifically had a 36% year-over-year growth (with a 50% increase in contributions).
Read: The Roth Strategy We Wish We Built for Early Retirement
Not all pension savers can be optimistic. The pandemic has put millions of Americans out of work, some of whom are close to retirement age and have not yet had enough to retire. The CARES law, passed in March, allowed savers to withdraw from their retirement accounts more than normal, although financial advisers encourage consumers to think twice before doing so.
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