Not that I want you to continue with the Jones, but are you saving for retirement? Don’t be left out. Retirement savings are currently in full swing.
Fidelity Investments, which is considered the main provider of individual pension accounts (IRA) in the United States, recently published its analysis of pension accounts in the first quarter of 2021 (tinyurl.com/287wuecn), with the main headline that the average balances between the more than 30 million IRA, 401 (k) and 403 (b) retirement accounts reached record levels for the second consecutive quarter.
This is particularly noteworthy given the financial challenges associated with retirement savings that occurred during the pandemic. Some companies have temporarily suspended corresponding contributions at 401 (k) s, while a recent MagnifyMoney survey (tinyurl.com/physhf46) indicated that almost 48 percent of respondents who had a pension savings account either stopped saving during the pandemic or reduced their pension contributions.
Still, according to Fidelity analysis, the average IRA balance was $ 130,000, up 31 percent from the first quarter of 2020. The average balance was 401 (k) s ($ 123,900, up 36 percent) and 403 (b) s. record) 107,300 US dollars, growth of 42 percent) also recorded great progress in 2021 compared to the first quarter of 2020.
Kevin Barry, president of job investment at Fidelity, said in a statement that “individuals cannot control the performance of the market from quarter to quarter or from year to year. What they can control is establishing and adhering to consistent, positive savings behaviors. “
Fidelity noted that one of the factors in the IRA’s contribution growth during the first quarter of 2021 included the time of year as some investors sought to make a tax-deferred contribution before the 2020 filing deadline for their tax returns. Overall, contributions were given to 1.3 million IRA accounts in the first quarter of 2021, an increase of 52 percent over the same quarter of 2020.
Another positive trend included saving younger people for retirement, as 26 percent of the IRA’s total contributions in the first quarter of 2021 were invested by investors under the age of 35 (an increase from 23 percent in the first quarter of 2020). I would like that percentage to continue to grow.
I am also a fan of the Roth IRA, which offers tax-free retirements. According to Fidelity, the money flowing into the Roth IRAs accounted for 60 percent of all IRA contributions for the first quarter of 2021.
The good news was also evident when it came to employer contributions. According to Fidelity, 95.5 percent of individuals on its 401 (k) platform had some form of contribution to their account in the first quarter, while 83.6 percent contributed to their 401 (k) and received an employer contribution; 7.3 percent make a contribution but do not receive an employer’s contribution; and 4.5 percent receive only some form of employer contribution.
According to Fidelity, the average employer contribution rate of 401 (k) was 4.6 percent (with an average contribution of $ 1,720). The most popular matching formula 401 (k)? It was still a 100 percent contribution for the first 3 percent of employee contributions, and a 50 percent contribution for the next 2 percent of employees. In my opinion, it is “free money” for retired savers, something that everyone must use.
Given that many people still feel financial challenges, it might seem a bit surprising that the percentage of workers who had arrears of 401 (k) fell to 17.5 percent in the first quarter of 2021 from 19.7 percent in the same quarter of 2020. Only 1.6 percent of 401 (k) savers started a new loan during the first quarter of 2021, compared to 2.4 percent a year earlier, while the percentage of workers who gave up their 401 (k) (including withdrawals) out of difficulty) fell to 2.4 percent in the first quarter of 2021 from 3 percent a year earlier.
In a separate study, Fidelity asked respondents how they used the money from their most recent loan, 401 (k) or 403 (b). Forty-four percent reported paying off debt or paying off debt, while 37 percent used it for household expenses (including buying a home or upgrading one). Interestingly, 60 percent chose the loan option because they preferred borrowing from themselves rather than from others.
Borrowing at home reminds me of an old saying I already mentioned and which is appropriate for those who successfully save for retirement: Pay yourself first. If the pandemic has led you to move away from investing in retirement, try to get back to it as soon as possible.
Julie Jason, JD, LLM, personal money manager (Jackson, Grant of Stamford) and author, welcomes your questions / comments (readers@juliejason.com). Her awards include the 2020 Clarion Award, which symbolizes excellence in clear, concise communications. Her latest book, a curated collection of Julie’s columns, reads “Safely Retreat: An Insight into Money Management from an award-winning financial columnist.” To hear Julie speak, visit juliejason.com/events.
