Average 401(k) balances plunged 23% year-over-year due to market volatility, Fidelity says

Retirement saver's have taken a heavy toll on the market.

Fidelity Investments, the nation's largest provider of 401(k) plans, reported that the average 401(k) balance is down 23% from a year ago. More than 35 million retirement accounts are handled by the firm.

In the third quarter of 2022, the average individual retirement account balance plummeted 25%.

Fidelity found that most of the retirement saver's still contribute. Fidelity suggests a savings rate of 15% for the 401(k) contribution rate.

Kevin Barry, president of workplace investing at Fidelity, said that the market has taken some dramatic turns. The retirement saver chose to avoid the drama.

Barry said that one of the most important aspects of a sound retirement savings strategy is contributing enough consistently.

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Fidelity said that just 4.5% of savers changed their asset allocation in the most recent quarter. 401(k) administrator Alight Solutions found that some retirement savers were scared after suffering big losses due to inflation, interest rates, and other factors.

Mike Shamrell, Fidelity's vice president of thought leadership, encourages people not to make changes to their account based on short-term market events.

Taking a long-term approach to retirement is the best way to go.

According to Fidelity, only 2.4% of plan participants took a loan from their 401(k)

Federal law allows workers to take out up to half of their account balance. Financial experts advise against tapping a 401(k) before exhausting all other options since you will lose the power of compound interest

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