Fidelity Q3 Retirement Analysis: Account Balances Decline, but Present Opportunity for Roth Conversion

BOSTON–(BUSINESS WIRE)–Fidelity
Investments
® today released its third quarter
401(k) and Individual Retirement Account (IRA) savings analysis. The
analysis1 reveals:

  • Market performance impacted account balances. Last quarter, the
    stock market experienced some of the worst volatility in recent years,
    especially in August, when the Dow Jones Industrial Average (DJIA)
    dropped over 1,500 points. As a result, retirement account balances
    were reduced in the third quarter. The average 401(k) balance dipped
    to $84,400 at the end of Q3, down from $91,100 at the end of Q2 and
    from $89,100 one year ago. IRA balances decreased to $88,700 at the
    end of Q3, down from $96,300 at the end of Q2 and $92,100 from one
    year ago.
  • A record number of people sought guidance in Q3. Individuals
    reached out for help and guidance in record numbers, both on the phone
    and online. Fidelity managed over 16 million online inquiries from IRA
    and 401(k) investors from August 23 – 29. On Monday, August 24,
    Fidelity received over 160,000 phone calls from IRA and 401(k)
    investors, one of Fidelity’s busiest days on record. Customers
    contacted Fidelity for help on a variety of topics, including how to
    manage their investments during periods of volatility, the pitfalls of
    converting to “all cash” and the possible reasons behind recent market
    drops.
  • The vast majority of investors stayed the course and did not make
    significant changes to their asset allocation or contribution amount
    .
    Only 4.9 percent of 401(k) account holders made changes to their asset
    allocation in Q3, as did less than one in five (16 percent) IRA
    customers. The average total 401(k) contribution amount was $2,610 in
    Q3, down slightly from $2,770 in Q2 but consistent with $2,670 in Q3
    last year. The average 401(k) contribution rate was 8.2 percent, up
    from 8.0 percent a year ago. IRA contributions also remained
    consistent, as IRA account holders contributed an average of $1,260 in
    Q3, close to the average contribution amount of $1,270 a year ago.

Market Changes May Present Opportunity to Consider a Roth 401(k) or
IRA Conversion

Changes in the market, whether up or down, present an opportunity for
people to review their savings and asset allocation strategy, as well as
consider a conversion to a Roth 401(k) or Roth IRA. To convert savings
from a traditional account to a Roth account, an individual must pay
income taxes on the amount being converted. A lower account balance with
less gains may mean less taxes due. Once converted to a Roth account,
the savings would then grow tax-free and any withdrawals made in
retirement would not be taxable.

The popularity of Roth accounts has grown significantly over the past
several years, and at the end of Q3 almost 75,000 IRA account holders
have converted to a Roth IRA. Roth IRA conversions at Fidelity are up 36
percent since Q3 of last year, and 53 percent of Fidelity 401(k) plans
offer a Roth contribution option as of Q3, up from 36 percent three
years ago. More than 70 percent of people who have their 401(k) account
with Fidelity have access to a Roth 401(k) option, and 12 percent of
401(k) account holders in their late 20s are contributing to a Roth
401(k), up from 9 percent five years ago.

“Recent Fidelity research with the Stanford Center on Longevity2
found that nearly three out of four pre-retirees cited ‘concern over
economic uncertainty’ as a possible reason to continue to work later in
life, so we understand that market changes are a big concern for
pre-retirees,” said Doug Fisher, senior vice president, Fidelity
Investments. “Periods of major market volatility, whether up or down,
give investors an opportunity to assess their overall financial
wellness, which should include a review of their retirement savings and
asset allocation, as well as extend to a more basic assessment of their
financial health, including overall family spending and budgeting.”

About Fidelity Investments

Fidelity’s goal is to make financial expertise broadly accessible and
effective in helping people live the lives they want. With assets under
administration of $5.0 trillion, including managed assets of $2.0
trillion as of September 30, 2015, we focus on meeting the unique needs
of a diverse set of customers: helping more than 24 million people
invest their own life savings, nearly 20,000 businesses manage employee
benefit programs, as well as providing nearly 10,000 advisory firms with
technology solutions to invest their own clients’ money. Privately held
for nearly 70 years, Fidelity employs 42,000 associates who are focused
on the long-term success of our customers. For more information about
Fidelity Investments, visit https://www.fidelity.com/about.

Diversification/asset allocation does not ensure a profit or guarantee
against loss.

Keep in mind that investing involves risk. The value of your investment
will fluctuate over time and you may gain or lose money.

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

742172.1.0

© 2015 FMR LLC. All rights reserved.

1 Analysis based on 21,400 corporate defined contribution
plans and 13.6 million participants, as of September 30, 2015. These
figures include the advisor-sold market, but excluding the tax-exempt
market. Also excluded are non-qualified defined contribution plans and
plans for Fidelity’s own employees. Fidelity’s IRA analysis based on 6
million IRA customers.

2 Fidelity Investments Decision to Retire Research
represents insight from a series of in-depth interviews conducted in
Boston, Chicago and San Francisco (April 2015), and an online survey
of more than 12,000 defined contribution plan participants recordkept by
Fidelity, ranging in age from 55 – 80 across all industries and income
levels, who felt they had some control over their decision to retire.
The research was completed in August 2015 by Greenwald & Associates,
Inc., an independent third-party research firm. Fidelity also worked in
collaboration with the Stanford Center on Longevity on the study.

Contacts

Fidelity
Corporate Communications, 617-563-5800
fidelitycorporateaffairs@fmr.com
or
Mike
Shamrell, 617-563-1996
michael.shamrell@fmr.com
Follow
us on Twitter @FidelityNews