A fifth (19 per cent) of U.S. employees say they’ve adjusted their retirement strategy and are taking a more conservative savings approach amid economic uncertainty, according to a new report by Fidelity Investments Inc.
It found the total savings rate for the second quarter of 2022 continued the positive momentum achieved in the first quarter, with a 14 per cent contribution rate. Men continued to save at higher rates than women (14.7 per cent versus 13.7 per cent, respectively), while pre-retirement baby boomers saved at the highest levels (16.6 per cent).
The average individual retirement account balance was $110,800, an 18 per cent decrease from 2021, while the average 401(k) balance dropped to $103,800 in the quarter, down 20 per cent from a year ago. The number of IRA accounts held by generation Z and millennial workers increased by 87 per cent and 24 per cent, respectively, compared to last year.
Only five per cent of 401(k) and 403(b) savers made a change to the asset allocation in the second quarter. Of these employees, 85 per cent only made one change and the top change involved shifting savings to more conservative investments (38 per cent).
More than eight in 10 (85 per cent) of gen Z workers had all of their 401(k) savings in a target-date fund and those who heavily invested in these funds experienced the smallest declines, with the average account balance dropping by only eight per cent. The report also found the use of target-date funds as a default option continues to increase in popularity among plan sponsors, up to 93 per cent from 88 per cent in the second quarter of 2017.
Read: 38% of U.S. employees increased 401(k) contributions in 2021: survey