Retirement account balances in Q2 2017 reached all-time highs for the third consecutive quarter, according to an Aug. 3, 2017, release from Fidelity Investments.

IRA account balances hit all-time high

Positive stock market performance and increasing contributions drove the average 401(k) and IRA balances to record levels. The average 401(k) balance hit $97,700, while the average IRA balance climbed to $100,200, Fidelity Investments said in the release.

Increasingly, account holders are recognizing the benefit of using those funds to invest in real estate. Many choose to roll over their 401(k) and other retirement portfolios into a self-directed IRA, giving them even more control over their investments.

Beware of becoming over-exposed to stocks

The stock market’s performance over the last several years means people may have a greater allocation of stocks in their 401(k) accounts than Fidelity recommends. This could expose their retirement savings to unnecessary risk in the event of a market downturn, according to the release.

Fidelity found that 40 percent of those who managed their own 401(k) asset allocation – as opposed to having their savings in a target date fund or managed account – had a stock allocation in their 401(k) that was higher than recommended, up from 38 percent in Q2 2016.

“Having the right balance of stocks, bonds and cash in your retirement savings is just as important when the market swings up as when it goes down, Kevin Barry, president, Workplace Investing, Fidelity Investments, said in the release.

“While we’ve had several years of positive market performance and are experiencing record growth in account balances, it’s important for retirement savers to make sure they are within the recommended asset allocation to help protect their savings,” Barry said.

• The average 401(k) account balance triples for long-term savers. People in their 401(k) for 10 years straight saw their balance increase to a record average of $266,100, up from $78,800 in Q2 2007. The 10-year growth is attributed to 53 percent market action and 47 percent employee contributions, which shows the benefit of saving and investing with a long-term view.
• Small business retirement accounts see double-digit growth. Fidelity’s yearly analysis of small business retirement plans, which includes self-employed 401(k) accounts, self-employed (SEP) IRAs and Savings Incentive Match Plan for Employees (SIMPLE) IRAs, indicates average balances have increased by double digits since Q2 2016. The average balance for self-employed 401(k)s increased 10 percent to $162,700, while the average balance for SEP IRAs increased 14 percent to $100,400. The average balance for SIMPLE IRAs grew to $39,000, an increase of 10 percent from Q2 2016.
• One in five workers still aren’t taking full advantage of their 401(k) company match. Over the last 12 months, employees contributed a record average of $5,850 to their 401(k), up 4 percent from one year prior. But many employees are not taking full advantage of their employer’s matching contributions. Fidelity research shows more than one in five employees (21 percent) did not contribute enough to their 401(k) to take full advantage of their company’s matching contributions, potentially missing out on thousands of dollars in matching contributions over the course of a year.

“While many employers have made it easier to enroll and get started in their 401(k) plans, employees need to verify they are they are taking full advantage of their company’s matching contributions,” Barry said in the release.

“Nearly 90 percent of employees are eligible for some sort of company match, so it’s important to know what your company offers and make every effort to save enough to get the full match. If not, you’re essentially leaving free money on the table.”