Fidelity® Average 401(k) Balance Climbs to Record High at the End of 2012

BOSTON--(BUSINESS WIRE)--Fidelity Investments^® today released its quarterly analysis¹ of 401(k) plans, which showed the average balance had increased to another record high² by the end of 2012. The average 401(k) balance hit $77,300 at the end of the year, up from $69,100 one year earlier, an increase of 12 percent. The fourth-quarter average balance tops the previous quarter’s high of $75,900. About two-thirds of the 2012 increase was attributable to market action while one-third was due to participant contributions.

“It’s encouraging to see how continued savings combined with a healthy equity market have led to another record-high balance for 401(k) savers”

“It’s encouraging to see how continued savings combined with a healthy equity market have led to another record-high balance for 401(k) savers,” said James MacDonald, president, Workplace Investing, Fidelity Investments. “Our efforts at Fidelity are focused on keeping participants engaged in the retirement planning process by providing the tools and support to help them better understand where they are in relation to their goals as well as steps they can take to achieve better outcomes.”

Participants on average save³ 8 percent of their annual salaries in their 401(k) plans. When the typical employer contribution is factored in, be it a match or profit sharing, the average participant’s total savings rate increases to 12 percent. In addition, for a 15^th straight quarter, more participants increased their savings rate than decreased it (5.8 percent vs. 3.1 percent).

Roth Participants Boast a Higher Savings Rate

Recent legislative provisions have raised awareness of Roth 401(k) opportunities for workplace participants, such as tax-free growth potential and tax-free withdrawals for them and their heirs⁴. Regulations now allow participants to convert money in existing qualified savings plans to a Roth account, should their plan include the investment option⁵. Today, 37 percent of workplace retirement plans offer a Roth savings option, up from 12 percent five years ago. Of these plans, 12 percent of them offer the Roth in-plan conversion option.

Younger investors tend to utilize Roth the most. One-in-10 (10 percent) participants in their 20s contribute to this option, versus 6 percent overall. These individuals may be well-positioned to benefit from Roth due to their long investment horizon and the likelihood they will be in a higher tax bracket upon retirement.

Roth contributors also boast a higher savings rate, deferring an average of 11 percent. Nearly six out of 10 (59%) of these participants utilize a tax diversification strategy by saving a portion in a post-tax Roth 401(k) as well as a pre-tax savings option. When factoring in employer contributions, Roth participants show a total savings rate of 15.3 percent, more than 3 percentage points higher than the overall average.

Fidelity Guidance Helps with Roth Decisions and All Savings Options

As part of Fidelity’s Plan for Life workplace guidance experience, 401(k) participants have access to comprehensive retirement education to assist them with Roth considerations and other investment questions at all stages of their working lives. This guidance experience includes dedicated telephone representatives focused on supporting workplace participants, innovative online tools, Fidelity’s engaging NetBenefits^® portal, smartphone apps, and onsite, on-demand and web-based workshops. During the fourth quarter of 2012, attendance at Fidelity guidance workshops was up 44 percent over the same period the prior year.

About Fidelity Investments

Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $3.9 trillion, including managed assets of $1.7 trillion, as of December 31, 2012. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.

Investing involves risk, including risk of loss.

Guidance provided by Fidelity is educational in nature, is not individualized and is not intended to serve as the primary or sole basis for your investment or tax-planning decisions.

Fidelity Brokerage Services LLC, Member NYSE, SIPC
900 Salem Street, Smithfield, RI 02917

Fidelity Investments Institutional Services Company, Inc.
500 Salem St., Smithfield, RI 02917

¹ All data as of Dec. 31, 2012, unless otherwise stated, and is based on approximately 20,500 workplace plans and 12 million participants.
² The fourth quarter’s mean balance was highest ever in nominal (current Dec. 31, 2012) dollars. It was also the highest in inflation-adjusted dollars going back to the beginning of 2000 with the exception of March 31, 2000 and June 30, 2000.
³ Annual deferral rate.
⁴ A distribution from a Roth 401(k) is tax free and penalty free, provided the five-year aging requirement has been satisfied and one of the following conditions is met: age 59½, disability, or death.
⁵ Participants must take into consideration the associated tax liability.