Americans have pumped 401(k) holdings to record levels — and been rewarded for their patience
Despite stock market jitters, Americans stayed the course with their retirement savings, and their grit through a period of intense volatility has paid off.
While retirement savers saw a drop in average 401(k), 403(b), and IRA balances due to market volatility, they continued to contribute to their retirement accounts at record rates.
The average 401(k) savings rate hit a record 14.3% in the first quarter of 2025, according to Fidelity's latest retirement analysis of 17.3 million IRA accounts as of March 31, 2025. That number combines both employee and employer contributions and marks the highest collective savings rate ever tracked by the asset manager. The employee contribution rate was 9.5%, and the employer contribution rate was 4.8%.
The 14.3% savings rate is the closest it's ever been to Fidelity's recommended savings rate of 15%.
As markets gyrated amid trade war tensions earlier this year, it would be understandable to see many investors pause contributions or even pull money out of the market. Indeed, some retail investors did pull out and increase their allocations to cash.
However, with tariff volatility now in the rear-view, staying invested has proven to be the best move.
Since the end of March, the S&P 500 is up more than 6%, and the benchmark index is up 1.7% year-to-date. Those who stopped investing in response to market volatility would have missed out on the S&P 500's best May in 35 years.
A chart from Fidelity shows outcomes for a starting balance of $100,000 invested in 70% stocks and the rest in bonds and cash between January 2022 and December 2024.
Fidelity
In this scenario, the worst-performing strategy was to move to cash in July 2022, after the market dropped 20%, and stop contributing. The best-performing strategy was to stay the course and maintain the same asset mix, with annual contributions of $10,000. Even if you moved to cash and continued to contribute, the end result would still be worse than if you had remained invested.
Stocks have historically experienced three downturns of 5% a year, one correction of 10% a year, and one 15% decline every three years, so drops in the market are common.
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