Retirement credits are shrinking — but not for this generation

Retirement accounts continue to shrink from coast to coast, as they have throughout 2022, according to new data from Fidelity.

In the third quarter of this year, the average IRA balance fell to $101,900, a decrease of 24.9% from the same period in 2021. It also recorded an 8% decrease from the second quarter of this year.

Meanwhile, the average 401(k) balance is down under six figures, to $97,200. This is a decrease of 22.9% from the same period last year, and a decrease of 6% from the second quarter.

This is the third quarter in a row that retirement savings for Americans has declined. However, there is one generation bucking this trend.

Generation Z members saw their balances rise slightly in the third quarter, up 1.2%.

Fidelity notes that the balances of people in this group, people born from 1997 to 2012, tend to be smaller relative to the balances of people of other generations. This fact alone can contribute to better performance.

For example, a person who has $10,000 in an account and contributes $1,000 suddenly increases their account balance by 10% in an instant. These jumps may appear to mitigate the impact of market losses on accounts with relatively small balances, at least in the short term.

Indeed, Fidelity notes that Generation Z members contribute more money to their accounts than in the past.

Bitter but diligent savers

Other generations also continue to be on the right track when it comes to retirement savings, even in the face of a market that has been plunging almost all year.

Average account balances may drop, but people of all ages continue to save. In fact, the number of IRAs on the Fidelity platform has increased this year.

In a summary of Fidelity’s results, Kevin Barry, Head of Workplace Investment at Fidelity Investments, says:

“Retirement savers choose wisely to avoid drama and continue to make smart choices for the long term. This is important, because an essential aspect of a sound retirement savings strategy is to contribute enough consistently—in bull markets, bear markets, and sideways markets—to help reach your goals.” .

But even though people continue to save, it doesn’t make them feel much better about the stock market’s poor performance in 2022.

The number of people who have negative feelings about their finances (32%) now exceeds those who have positive feelings (30%).

Last year, it was quite the opposite: At the time, 45% of workers felt positive about their finances, more than double the percentage who had negative feelings (22%).

Fidelity’s findings were based on an analysis of 35 million retirement accounts, 401(k) and 403(b) accounts.

For more information on investing in retirement, check out “5 Simple Ways to Invest Your Retirement Savings.”