Fidelity® Q3 2019 Retirement Analysis: Volatility Drives Slight Dip in Average Account Balances, but the Majority of Retirement Savers “Stayed the Course”
BOSTON--(BUSINESS WIRE)--Nov 14, 2019--
November 14, 2019 -- Fidelity Investments®, the market leading workplace benefits company and one of the largest and most diversified financial companies in the industry, today released its quarterly analysis of retirement savings trends, including account balances, contributions and savings behaviors, across more than 30 million retirement accounts. Market conditions in Q3 caused average account balances to dip slightly in the third quarter after reaching near-record levels in Q2.
Highlights from Fidelity’s Q3 2019 analysis include:
Average Retirement Account Balances
403(b)/Tax Exempt 3
“Although the stock market’s performance had a slight impact on account balances, we continue to see positive investing and savings behaviors among people saving in Fidelity retirement plans,” said Kevin Barry, president of Workplace Investing at Fidelity Investments. “While market swings like the kind we experienced in Q3 can be unnerving, it’s encouraging to see that most retirement savers didn’t have an emotional reaction and did not take any steps that could harm their long-term savings efforts.”
Workers May Own Too Much Stock in Accounts, Exposing their Savings to Unnecessary Risk 5
Although an increasing number of workers are leveraging target date funds to help keep their asset allocation on track and help manage the risk to their retirement savings, Fidelity’s Q3 analysis found that many 401(k) account holders had stock allocations higher than those recommended 5 for their age group. Fidelity compared average asset allocations to an age-based target date fund and found nearly a quarter (23.1%) of 401(k) savers still have a higher percentage of equities than recommended, including 7% who are 100% equity. Among Baby Boomers, the over-allocation of stock was even higher – 37.6% have too much equity, including 7.9% who are in 100% equities. This is in addition to the 5% of Boomers who have zero exposure to equities in their 401(k).
Fidelity’s analysis also found asset allocation among workers saving in 403(b)/tax exempt accounts were slightly more on target. As of Q3, 81% have the suggested level of stock allocations recommended for their age group and only 11% with stock allocations higher than those recommended 5 for their age group.
“While the market’s performance over the last few years has had a positive effect on many retirement account balances, it may have also contributed to some individuals having more stock than is recommended. Maintaining the right balance of stocks, bonds and cash can help ensure investors are not exposing their savings to any unnecessary risk, especially if the market was to trend downward,” continued Barry.
For more information on Fidelity’s Q3 2019 analysis, please click here to access Fidelity’s “Building Financial Futures” overview, which provides additional details and insight on retirement trends and data.
About Fidelity Investments
Fidelity’s mission is to inspire better futures and deliver better outcomes for the customers and businesses we serve. With assets under administration of $7.8 trillion, including managed assets of $2.8 trillion as of September 30, 2019, we focus on meeting the unique needs of a diverse set of customers: helping more than 30 million people invest their own life savings, 22,000 businesses manage employee benefit programs, as well as providing more than 13,500 financial advisory firms with investment and technology solutions to invest their own clients’ money. Privately held for more than 70 years, Fidelity employs more than 40,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit https://www.fidelity.com/about.
Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.
Target Date Funds are an asset mix of stocks, bonds and other investments that automatically becomes more conservative as the fund approaches its target retirement date and beyond. Principal invested is not guaranteed.
Fidelity Brokerage Services LLC, Member NYSE, SIPC
900 Salem Street, Smithfield, RI 02917
Fidelity Investments Institutional Services Company, Inc.,
500 Salem Street, Smithfield, RI 02917
National Financial Services LLC, Member NYSE, SIPC,
200 Seaport Boulevard, Boston, MA 02110
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1 Analysis based on 23,000 corporate defined contribution plans and 17.4 million participants as of September 30, 2019. These figures include the advisor-sold market but exclude the tax-exempt market. Excluded from the behavioral statistics are non-qualified defined contribution plans and plans for Fidelity’s own employees.
2 Fidelity IRA analysis based on 9.6 million Personal Investing IRA accounts, as of September 30, 2019 and includes all IRAs except for inherited IRAs, small business IRAs and IRAs distributed through the advisor-sold market.
3 Analysis based on 10,486 defined contribution plans, including 403(b), 401(a), 401(k) and 457(b) qualified, non-qualified and TEM pooled plans, and 6.2 million participant accounts, for 4.7 million unique individuals, in the tax-exempt market, as of September 30, 2019.
4 Target date funds are a common default investment options for employers who automatically enroll their participant in the company’s retirement plan. As of September 30, 2019, 91 percent of 401(k) plans managed by Fidelity default participants into a target date fund
5 For “Asset Allocation” purposes, age appropriate equity allocation is defined as the participant’s current age and equity holdings in a retirement portfolio compared with an example table containing age-based equity holding percentages based on an equity glide path. The Fidelity Equity Glide Path is an example we use for this measure and is a range of equity allocations that may be generally appropriate for many investors saving for retirement and planning to retire around ages 65 to 67. It is designed to become more conservative as participants approach retirement and beyond. The glide path begins with 90% equity holdings within a retirement portfolio at age 25 continuing down to 19% equity holdings 10-19 years after retirement. Equities are defined as domestic equity, international equity, company stock, and the equity portion of blended investment options. The indicator for asset allocation is determined by being within 10% (+ or -) of the Fidelity Equity Glide Path. We assume self-directed account balances (if any) are allocated 75% to equities, regardless of participant age and so the Asset Allocation Indicator has limited applicability for those affected participants. For purposes of this metric, participants enrolled in a managed account or invested greater than or equal to 80% of their account balance in a single target date fund are considered to have age appropriate equity allocation. Investors should allocate assets based on individual risk tolerance, investment time horizon and personal financial situation. A particular asset allocation may be achieved by using different allocations in different accounts or by using the same one across multiple accounts.
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CONTACT: Corporate Communications
KEYWORD: MASSACHUSETTS UNITED STATES NORTH AMERICA
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SOURCE: Fidelity Investments
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PUB: 11/14/2019 08:30 AM/DISC: 11/14/2019 08:30 AM