An analysis has revealed a concerning picture of the readiness of many Americans for their retirement years.
Fidelity Investments recently looked at data from approximately 45 million different retirement accounts under its management. The median 401(k) balance stood at $23,800 in the third quarter of 2023, while 403(b) accounts and individual retirement accounts (IRAs) did not fare any better, logging $20,600 and $14,500 as median balances, respectively.
For perspective, the multinational firm recommends that individuals have 10 times their annual salary saved up by the time they retire.
Americans have reported feeling financially stressed these past few years. The rising cost of living outpacing annual salaries for many has resulted in growing household debt, with more than 80% of respondents in a recent poll from the Associated Press-NORC Center for Public Affairs Research reporting that they had fallen further in the hole this year.
This has led to a deprioritization of retirement savings for some Americans, with 23% of respondents in another survey from ScoreSense saying they had reduced retirement account contributions due to higher household expenses from inflation.
Fidelity found that more Americans are depleting their retirement savings by taking out loans — with the share of 401(k) holders with an outstanding loan rising from 16.8% to 17.6% year over year — or making hardship or in-service withdrawals, which logged 2.3% and 3.2% in Q3 of this year, respectively.
At the same time, while Fidelity’s figures represent a slight dip from last quarter, they also show a year-over-year increase of 11% for those with 401(k) and 403(b) accounts and 8% for people with IRAs.
Kevin Barry, president of Workplace Investing at Fidelity, suggested that this could mean that Americans are learning to better adapt to financial hardship.
“They are learning how to stay afloat in very challenging financial conditions — including having enough money set aside should an emergency arise,” Barry said in a news release. “Through it all, we are pleased to see retirement savers continue to stay the course with steady savings rates and continued commitment to their futures.”
When considered by age, the retirement savings figures show that many baby boomers are more or less on track. They boasted the highest savings, with an average of $212,600 in 401(k) accounts, $196,600 in 403(b) accounts, and $201,640 in IRAs.
Gen Z-ers, those born between 1997 and 2012, were also showing remarkable growth in IRA accounts, marking a 63% increase year over year.
However, as previously reported by The Dallas Express, things ultimately do not look great for Generation X, which refers to individuals born between 1965 and 1980. Although they are starting to hit the age for retirement, a recent study by the National Institute on Retirement Security found that approximately 40% had no retirement savings whatsoever.
