401(k) Specialist Issue 2 - 2022 - 44

401(k) END NOTES
Here's Why You Stay the Course, 401(k)
Savers!
By Brian Anderson
AS WE ENTER Summer 2022, Americans
are understandably nervous about the
state of the economy.
We get it. Rampant inflation, rising
interest rates, a stock market slump, a great
political divide, Russia invading Ukraine...
and we still haven't kicked the COVID
pandemic.
There's plenty to worry about financially.
But so far, data shows Americans are doing
a fairly remarkable job of staying the course
when it comes to continuing to contribute
to their retirement accounts.
The latest evidence of this came from
Fidelity Investments' Q1 2022 retirement
trends update, released in mid-May, providing
a suitably representative snapshot of
current 401(k) participant behavior.
Despite the market volatility in Q1
and its impact on account balances, the
latest quarterly analysis found that most
investors indeed " stayed the course " and
continued to take positive steps to save for
retirement.
Thanks in large part to stock market
losses (the Dow and S&P 500 lost 4.6%
and 4.9%, respectively, in the first quarter
while the Nasdaq lost 9%), average 401(k)
account balances dropped 2% from a year
ago and 7% from Q4 2021 to $121,700 at
the end of Q1 2022.
Nevertheless, Fidelity reported the total
401(k) savings rate reached record levels,
and very few people made changes to
the allocation within their account. Only
5.6% of 401k savers made a change to the
allocation within their 401(k) account in the
first quarter.
" During periods of economic uncertainty,
it's important for retirement savers to stay
focused on their long-term savings goals
and not make knee-jerk reactions to shortterm
market events, " said Kevin Barry,
44
ISSUE 2 2022 | 401kSpecialist.com
Investments for the past decade saw a
nearly fivefold increase on average in their
account balances-from $85,100 in Q1 2012
to $383,100 in Q1 2022.
For 763,000 individuals who have been
participating in a 401(k) through Fidelity for
the last 15 years, the account balance has
grown to $482,900, up from $64,900 in Q1
2007.
When you stop
contributing to
a 401(k), you
hamstring the
awesome power of
compound interest
and prune what
could be the most
fruitful hedge
against inflation.
president of Workplace Investing at Fidelity
Investments. " While the market's performance
does impact account balances in
the near term, consistent contributions and
having an appropriate asset allocation are
just as important for a successful long-term
retirement savings strategy. "
Speaking of successful long-term strategies,
a deeper dive into the Fidelity data
shows that the 1.7 million Americans who
have maintained a 401(k) through Fidelity
With this kind of growth over time, the
benefits of taking a long-term approach to
retirement savings are clearly illustrated-
and are the kind of statistics 401k advisors
should be shouting from the rooftops in
times of economic uncertainty.
Temporary circumstances are bound to
tempt some participants into decreasing
or even suspending 401(k) contributions to
help them make ends meet. But when you
stop contributing to a 401(k), you hamstring
the awesome power of compound
interest and prune what could be the most
fruitful hedge against inflation.
While cutting out that daily Starbucks
stop or dropping one streaming subscription
might seem a bit painful now, the real
discomfort would be felt in retirement if
that contribution rate drops right now.
Brian Anderson is Managing Editor of 401(k)
Specialist.
http://www.401kSpecialist.com
401(k) Specialist Issue 2 - 2022

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