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


BOSTON, MA, November 6, 2015 -- Fidelity Investments® today released its third quarter 401k 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 401k 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 401k investors from August 23 - 29. On Monday, August 24, Fidelity received over 160,000 phone calls from IRA and 401k 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 401k account holders made changes to their asset allocation in Q3, as did less than one in five (16 percent) IRA customers. The average total 401k 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 401k 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 401k 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 401k 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 401k 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 401k account with Fidelity have access to a Roth 401k option, and 12 percent of 401k account holders in their late 20s are contributing to a Roth 401k, 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.

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.


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