Preparing for retirement requires looking at the broad picture. Still, it may be disheartening when your 401(k) or other retirement plan takes a hit, as was the case for many American workers in 2024, according to new statistics from Fidelity.
401(k) funds are often invested in the unpredictable stock market, fluctuating over time. Due to the COVID-19 pandemic, the stock market had a major dip in March 2020, although it has since rebounded and hit record highs in 2021. Nevertheless, the success of individual 401(k) plans can vary significantly based on the account holder’s investment decisions and other factors such as age, risk tolerance, and market circumstances.
It is crucial to remember that 401(k) funds are designed for long-term savings and investment and that short-term volatility need not necessarily cause anxiety for individuals who can stay the course and remain invested over the long haul. Even knowing this, watching your balances continue to decrease is distressing. How much did 401k plans lose in 2024?
Fidelity said on Thursday that the average 401(k) plan amount fell 20.5% in 2024, decreasing employee nest eggs to $103,900 by the end of 2024. This is compared to an average balance of $130,700 a year ago. The survey was conducted by Fidelity’s financial services and examined 22 million retirement plans held by account holders.
In 2024, 401(k) account performance was worse than the 19.4% decline in the S&P 500. IRA and 403(b) accounts, which public schools and nonprofits frequently utilize, were also negatively impacted.
Not surprisingly, Americans who are concerned about their diminishing retirement funds and rising inflation are also increasingly anxious about having enough money saved for retirement. A recent survey revealed that workers anticipate needing $1.25 million for a decent retirement, an increase of 20% from 2021.
Dwindling nest egg
Due to the worst year for stocks since 2008, Americans’ retirement savings took a huge hit last year. According to Fidelity, people continue to contribute to their 401(k)s despite the blow to their retirement savings. The contribution percentage remained relatively stable at 13.7% last year, and around one-third of employees raised their contributions, according to the business.
Who is the most frugal?
According to Fidelity, pre-retirement baby boomers save the most, putting 16.5% of their salary into retirement plans. Fidelity discovered that when individual and company contributions to 401(k) plans are included, women save somewhat more than males, 11.7% against 11.5%.
Yet, women often have smaller 401(k) balances than males, which may be due to lower lifetime earnings. The gender pay gap, which results in women receiving less than men for doing the same work or being forced into lower-paying professions, studies indicate that women receive 83 cents for every $1 earned by males. According to Fidelity, women had an average of $84,000 in their 401(k)s at the end of 2024, while men had $124,200.
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