Employees boost retirement savings accounts despite coronavirus recession
Average IRA balance increased compared to last quarter
A new report from Fidelity Investments shows that the coronavirus pandemic's toll on the economy did not keep Americans from growing their workplace retirement accounts.
The average IRA balance increased compared to last quarter and last year to $111,500, according to Fidelity. The average 401(k) balance increased to $104,400, a 14% jump compared to last quarter, but was down 2% compared to a year ago.
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"While the stock market’s performance in Q2 helped drive workplace retirement account balances higher, employer contributions also played a key role," Fidelity's President of Workplace Investing Kevin Barry said. "Nearly 90% of employers continued to offer matching contributions to their employees over the last quarter, despite the unsteady business landscape."
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Retirement account balances saw double-digit growth because of a surprisingly healthy stock market despite the pandemic's effect on economic uncertainty, according to Fidelity.
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The CARES Act signed in March enabled individuals to tape their retirement savings without paying a penalty to cover essential needs, but only 3% of eligible employees used the CARES Act provision to withdraw from a retirement account.
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Younger savers also opened a growing number of IRA accounts in the second quarter despite market volatility. The number of millennial IRA accounts grew 23% year over year, according to Fidelity.
Roughly one-quarter of Americans, however, "have no retirement savings or pension whatsoever," according to a report from the Federal Reserve based on 2018 data.