Americans’ retirement savings increased for the second straight quarter

Higher employer contributions, along with improving market conditions, boosted average individual retirement account (IRA), 401(k) and 403(b) balances in the first quarter of 2023, marking the second consecutive quarter that workers increased their retirement savings. according to Fidelity.

Fidelity found that the average IRA balance was $109,000, the average 401(k) balance was $108,200 and the average 403(b) balance was $97,900 in the first quarter. In the fourth quarter of 2022, IRAs accounted for $104,000, while 401(k)s accounted for $103,900 and 403(b)s for $92,700, according to the report, which analyzed data from 44.5 million accounts managed by the company.

A key driver of the growth in retirement account balances was a record level of employer contributions, with employer 401(k) contributions reaching an all-time high of 4.8% in the first quarter. About four-fifths of workers, 78%, contributed enough to receive the full match offered by their employers. That helped boost overall 401(k) savings rates, which include employer and employee contributions, to 14% in the first quarter from 13.7% in the fourth quarter last year.

More retirement savers also turned to IRAs in the first quarter, up 11% from last year’s first quarter, the report said. The most popular retail vehicle was the Roth IRA, with 58.4% of investors choosing the tax-first approach for IRA investments.

By generation, Gen Z workers’ 401(k) accounts gained the most, increasing 17% in the first quarter of 2023. They are up 34% from a year ago, which is also the largest year-over-year increase of any other generation.

“It’s encouraging that today’s younger generations are more financially savvy than any generation before,” said Joanna Rothenberg, president of Fidelity’s personal investing division.