Last week, the Dow Jones dropped 1,100 points, which is the biggest drop we’ve seen since June 2020. But, although the market has been volatile recently, data shows that retirement savings have remained largely stable in 2022.
According to a recent report from Fidelity, the average 401(k) savings rate reached a new high of 14% during the first quarter of 2022. Most experts recommend a retirement savings rate of 15%, but 14% is a significant milestone in the current market.
And what’s more encouraging is that this figure is increasing — the average retirement savings is up from 13.5% last year and 12.2% in 2012.
Most Americans Are Still Saving for Retirement
You’ve probably seen your retirement savings drop over the last few months. The S&P 500 has fallen by more than 20% since its January high, and the average 401(k) balance fell by 7% during the first quarter of 2022.
But financial experts are encouraged to see that retirement savings are at an all-time high. The 401(k) contribution amounts actually increased to 14%, and the percentage of individuals making withdrawals decreased to 3.2%
The majority of savers haven’t adjusted their allocations at all this year. Of those that did, most were older and nearing retirement age. 5.6% of account holders did make a change to their savings allocation during the first quarter, but they only made one change.
This positive turn of events is likely due to several factors, including workplace retirement incentives. For instance, automatic enrollment and automatic contribution increases could contribute to this higher savings rate.
4 Tips on How to Boost Your 401(K) Savings
There’s a lot of uncertainty in the market right now, but according to Fidelity, that’s even more reason to stay focused on your retirement goals. Individuals who continue contributing to their retirement savings see an average savings growth of 644% over 15 years.
It’s important not to make sudden changes based on short-term volatility. Here are four tips for boosting your 401(k) savings in 2022:
- Automate your savings: Automating your retirement savings is the best way to ensure you’re consistently saving for the future. Instead of consciously setting aside money each month, you can automate your account to transfer a certain amount into your retirement savings, saving you both time and effort.
- Take advantage of a Roth 401(k): It’s also a good idea to save some of your money in a Roth 401(k). With this type of plan, you’ll pay taxes upfront, allowing your money to grow tax-free. And a Roth 401(k) doesn’t come with the same income limits as a Roth IRA.
- Reduce fees wherever possible: It’s a good idea to regularly review your plan and look for ways to reduce your fees. The fewer fees you pay, the more of your investment savings you get to keep.
- Know your withdrawal options: Finally, you want to have a plan for how you’ll withdraw your retirement savings. Find out what the rules are before you hit your retirement date.