Fidelity® Reports Second Quarter 401(K) Analysis; Reveals How Saving Just One Percent More Now in 401(K), IRA Can Boost Retirement Income

BOSTON--(BUSINESS WIRE)--Fidelity Investments^® today released its quarterly analysis¹ of its 401(k) accounts— the largest in the industry² — along with an illustration of how saving just a little more each month now could have an impact on retirement income, especially for workers in their 20’s.

At the end of the second quarter, the average 401(k) balance remained relatively steady over the previous quarter³, ending at $80,600, and up nearly 11 percent from $72,800 during the second quarter 2012. For employees who were continuously employed and in a 401(k) plan for the last 10 years, the average balance rose to $211,800, up nearly 19 percent from a year ago⁴. Additionally, for the past four years, more employees increased their 401(k) deferral rate than decreased it.

“While it’s a good sign that some workers are increasing their savings for retirement, many younger workers – especially Millennials⁵ – aren’t saving at the recommended 10 to 15 percent of their income⁶,” said James MacDonald, president, Workplace Investing, Fidelity Investments. “It is critical young workers realize that even the smallest increase to their monthly savings today or just 1 percent – whether in a 401(k) or an IRA – could have a meaningful impact on their retirement paycheck down the road.”

Saving One Percent More a Month Now Could Boost Monthly Income in Retirement

To illustrate the impact of increasing 401(k) savings by just 1 percent monthly, Fidelity prepared two hypothetical scenarios of what the added savings could potentially translate into in retirement income for individuals that begin saving at ages 25 and 35 until the retirement age of 67⁷. The scenarios demonstrate the potential positive, long-term impact a 1 percent monthly increase in saving today could have on a person’s potential monthly retirement paycheck. The impact is greatest for younger individuals with the longest savings time horizon.

The table below shows rates of return for two different hypothetical 401(k) participants. For each individual, it illustrates both the current “cost” and the impact a sustained 1 percent savings increase could have on their retirement paychecks using two different investment return rates⁸ – 5.5 and 7.0 percent nominal returns. The “costs” of $33 and $50 at ages 25 and 35 respectively are assumed to grow along with the individual’s salary at 1.5 percent per year until their retirement age of 67.

Hypothetical impact of 1% increase in savings now on estimated monthly retirement income
Current Age	Current Salary	Initial Monthly “Cost” of 1% Savings Boost^9	Assumed Rate of Return	Potential Monthly Pre-Tax Increase to Retirement Paycheck^10
25	$40,000	$33	7.0%	$330
			5.5%	$200
35	$60,000	$50	7.0%	$270
			5.5%	$180

Click here for a visual infographic about the 1 percent increase.

Consistently Saving Extra $50 a Month in an IRA also Helps Build Better Outcomes

Saving in an Individual Retirement Account (IRA) is another great way to build savings for income in retirement. As a guideline, a 25-year-old who saves a consistent $50 more each month in an IRA until age 67 could receive an estimated $390 in additional pre-tax monthly retirement income. But waiting until age 35 reduces that additional monthly income in nearly half, illustrating the benefit of starting as early as possible.

The table below shows the potential impact $50 per month could have on both the 25 and 35-year-olds using two different investment return rates – 5.5 and 7.0 percent nominal.

Hypothetical impact of $50 increase in savings on estimated monthly retirement income
Current Age	Additional Consistent Monthly “Cost” for IRA Investor	Assumed Rate of Return	Potential Monthly Pre-Tax Increase to Retirement Paycheck
25	$50	7.0%	$390
		5.5%	$230
35	$50	7.0%	$220
		5.5%	$140

Online Tools Help Investors Estimate Retirement Income

For more detailed estimates, Fidelity offers engaging online guidance tools, such as Retirement Quick Check (RQC) and Income Simulator on Fidelity.com and NetBenefits^®, Fidelity’s workplace participant portal.

RQC uses an investor’s current income, expenses and assets, to estimate how much monthly income may be needed in retirement. It then shows the progress made with his or her current savings strategy and suggests steps to consider to best reach the goal. Income Simulator, launched earlier this year, is a tool available to workplace savers that automatically incorporates the user’s employer-sponsored retirement account plus offers them the option to add additional income sources, such as IRAs, Social Security, previous employer pensions and spousal savings. Its comprehensive modeling engine enables users to simulate different contribution levels, asset allocation and adjustments to anticipated retirement age to create a more detailed estimate. Fidelity recommends that investors review their portfolios at least once each year.

Guidance and Education Key Drivers for Improved Outcomes

In addition to Income Simulator and RQC, Fidelity offers comprehensive financial education to investors no matter how they work with our firm, at their workplace or on their own. Guidance is provided online, such as with our tools, over the phone, and in-person at our more than 180 investor centers nationwide.

Plan for Life, the company’s workplace guidance experience, offers education on topics such as investment diversification, age-based asset allocation, how to weather volatile markets, when to utilize catch-up contributions, and information on Roth options. Workplace guidance is offered online, by dedicated telephone representatives, and via in-person workshops including those focused specifically on the investment needs of women and pre-retirees.

In addition, Fidelity offers several educational resources at its online IRA Center where information on the benefits and different types of IRAs exists. The Fidelity Viewpoints Special Report: Retirement Roadmap provides a full selection of articles discussing timely issues pertaining to retirement.

About Fidelity Investments

Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $4.3 trillion, including managed assets of $1.8 trillion, as of July 31, 2013. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.

Investing involves risk, including risk of loss.

Guidance provided by Fidelity is educational in nature, is not individualized and is not intended to serve as the primary or sole basis for your investment or tax-planning decisions.

IMPORTANT: The projections or other information generated by Fidelity’s Retirement Quick Check and Fidelity Income Simulator regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Results may vary with each use and over time.

Income Simulator and Retirement Quick Check are educational tools.

Fidelity Brokerage Services LLC, Member NYSE, SIPC
900 Salem Street, Smithfield, RI 02917

Fidelity Investments Institutional Services Company, Inc.
500 Salem St., Smithfield, RI 02917

660132.1.0

© 2013 FMR LLC. All rights reserved.

¹ All data as of June 30, 2013 unless otherwise noted and is based on more than 20,700 corporate defined contribution plans, including advisor-sold, and 12.4 million participants.

² This statement is based on the results PLANSPONSOR’s 2013 annual Recordkeeping Survey in which Fidelity ranks first in total participants and assets under administration, and Cerulli Associates’ The Cerulli Edge®—Retirement Edition, first-quarter 2013 based on an industry survey of firms reporting total IRA assets administered for Q3 2012.

³ Average balance as of first quarter 2013 was $80,900.

⁴ Average 10-year continuous balance as of June 30, 2012 was $178,700.

⁵ Born between 1979-1991.

⁶ 10%-15% savings recommendation includes both employee and employer contributions.

⁷ Hypothetical examples assume the individual saves until retirement age 67, lives through age 93, and receives a 1.5 percent real (inflation-adjusted) increase in wages per year. Rate of returns are nominal 5.5% and 7.0% respectively; 5.5% return consists of 3.2% real return and 2.3% inflation while the 7.0% return consists of 4.7% real and 2.3% inflation. These illustrations assume deferral percentage rates stay constant throughout participants’ working careers. Estimated increases in retirement monthly income are in constant 2013 dollars. It is assumed that upon retirement the same real (inflation-adjusted) dollar amount is withdrawn annually through age 93. Assumes the participant took no loans or hardship withdrawals from their workplace plan. Maximum annual qualified 401(k) retirement plan employee contribution limits in 2013 are $17,500 (or $23,000 if age is 50 or older). All dollars shown are pre-tax dollars. Upon distribution applicable federal and state taxes are due. No federal, state or local taxes, inflation, or any account fees or expenses were considered. If they were, returns and monthly increase would be lower.

⁸ Investors should consider their current and anticipated investment horizon and income tax bracket when making an investment decision, as the illustrations may not reflect these factors. Systematic investing does not ensure a profit and does not limit loss in a declining market. These examples are for illustrative purposes only and do not represent the performance of any security. The assumed rates of return used are not guaranteed, and you may have a gain or loss when you sell your shares. Investments that have potential for a 5.5% or 7.0% annual rate of return also come with risk of loss.

⁹ $33 per month starting at age 25, which would increase along with assumed wage increases of 1.5% annual, for an average contribution of $46 monthly over the participant’s working life to age 67 (for the 35-year-old the $50/month averages to $64/month).

¹⁰ Monthly pre-tax hypothetical increase to retirement income in current dollars and do not take into account inflation.