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Retirement savers weathered a chaotic stretch of market gyrations in the first three months of the year, consistently adding to their savings, according to Fidelity Investments’ quarterly analysis.
While they experienced a drop in average 401(k), 403(b), and IRA balances, mostly due to market swings, savings rates remained consistent, with the average 401(k) savings rate increasing to a record 14.3%.
“We saw a lot of positive savings behaviors among employees,” Mike Shamrell, vice president of workplace thought leadership at Fidelity Investments, told Yahoo Finance.
“It was really encouraging to see that despite a lot of things going on, and economic ups and downs, people continued to save and didn’t pull back, or make a lot of changes to their asset allocation,” he said. “As a result, we saw the individual 401(k) savings rate increase to the highest level that we've seen.”
To break it down, the average employee contribution rate was 9.5%, and the employer contribution rate was 4.8%. This combined savings rate of 14.3%, up from 13.5% in 2020, is the closest it's ever been to Fidelity's suggested savings rate of 15%.
“For years, the individual savings rate was stuck at 8%,” Shamrell said.
Overall, average 401(k) retirement account balances dropped 3% through the first three months of this year to an average of $127,100 from $131,700 at the end of 2024. This was the second-highest average on record for the firm and an 11% increase from the start of 2024.
The data is based on 25,300 defined contribution plans at various companies across the country, covering 24.4 million participants.
Read more: How much can you contribute to your 401(k) in 2025?
In the first quarter, 17.4% of people with 401(k) accounts at Fidelity increased their savings rate, while 5% decreased. Less than 1% stopped saving altogether.
Surprisingly, only 6% changed their 401(k) asset allocation. Of those who did, about 3 in 10 moved into more conservative investments.
There are two big drivers.
First, automatic enrollment in employer-provided retirement accounts for new employees and auto-escalation each year keep the trains running through all kinds of uncertainty.
More than 1 in 4 plans now offer employer-set automatic escalation, and 35% of plans default to automatically enrolled employees at a 5% contribution rate or higher, according to Fidelity data, with an annual 1% increase until reaching roughly 10% of pay.
“The increasing use of auto escalation is a big factor in why we are seeing a gradual increase in the individual savings rate,” Shamrell said.
