Fidelity Q3 Analysis: Retirement Balances Rise, a Sharp Increase in Adoption of Health Savings Accounts

BOSTON--(BUSINESS WIRE)--Fidelity Investments^® today released its 401(k) and Individual Retirement Account (IRA) analysis¹ for the third quarter of 2016, which reveals:

• Increased retirement account balances. The average 401(k) balance rose for the second straight quarter, up 2 percent from Q2 and 7 percent year-over-year. The average IRA balance increased 5 percent from Q2 and 6 percent year-over-year.

Average Balances
	Q3 2016	One year ago	5 years ago
401(k)	$90,600	$84,400	$64,300
IRA	$94,100	$88,800	$66,100

• Long-term savers see solid gains. Fidelity’s analysis of 401(k) savers who have been in their company’s 401(k) plan for 15 years straight² shows the average account balance reached $331,200 at the end of Q3. In 2001, these individuals had an average account balance of about $43,900, which illustrates how a consistent focus on savings can deliver long-term benefits.
• A record number of Roth IRA accounts. The number of Fidelity Roth IRA accounts reached 2 million at the end of Q3, a 5 percent increase from a year ago. Since Q3 2011, more than 500,000 Roth IRA accounts were added, and during that time the number of millennials³ with Roth IRA accounts more than doubled to 353,000.
• Target date funds helping keep investors on track. Fidelity recommends that people regularly monitor the mix of stocks, bonds and cash in their 401(k), but not make changes driven by short-term market volatility or other economic events. Despite recent market volatility, the percentage of 401(k) savers⁴ who changed their asset allocation dropped to 7.4 percent, the lowest rate ever and down from 8.5 percent a year ago. One reason for this trend is that more people are saving all of their 401(k) assets in a target date fund. At the end of Q3, 44 percent of Fidelity’s 401(k) savers had all their 401(k) savings in a target date fund, up from 41 percent a year ago.

“Fidelity has always stressed that people should take a long-term approach to their retirement savings – it’s best to view this as a marathon, not a sprint,” said Jeanne Thompson, senior vice president, Workplace Investing, Fidelity Investments. “When the market gets shaky, it’s important to stay focused and to stick to the fundamentals of retirement savings: have a plan, make regular contributions and ensure your asset allocation is aligned with your objectives. All of these steps will put you in the best possible position to reach your retirement goals.”

Health Care Cost Concerns Drive a Significant Rise in Health Savings Accounts

Fidelity also saw a significant increase in the number of people using health savings accounts (HSAs) to cover current and future qualified medical expenses. In the past year, the number of HSAs provided by Fidelity grew 43 percent to 501,000, with an average HSA balance of $3,150.

A Fidelity analysis⁵ shows that while more people are using HSAs, they’re not spending as much as they thought they would. In fact, three-quarters (76 percent) of HSA account holders withdrew less than they contributed to their HSA. As a result, Fidelity is seeing more people carry over their HSA balance from year-to-year, and an increasing percentage of people investing their HSA dollars to grow their account, which can help to address future qualified medical expenses, including expenses in retirement.

Growth in Educational Resources and Tools

For people with questions on when an HSA is right for them, a Fidelity Viewpoints article has tips to make the most of an HSA and a podcast explains what to look for when considering a health savings account.

“Paying for health care can be a big source of anxiety for people, both now and especially in the future with the cost of health care in retirement estimated⁶ to be $260,000,” continued Thompson. “Health savings accounts are a great tool to help employees meet their current and future health care costs, which can improve their financial well-being and lead to more productive workers.”

About Fidelity Investments
Fidelity’s goal is to make financial expertise broadly accessible and effective in helping people live the lives they want. With assets under administration of $5.6 trillion, including managed assets of $2.1 trillion as of September 30, 2016, we focus on meeting the unique needs of a diverse set of customers: helping more than 25 million people invest their own life savings, nearly 20,000 businesses manage employee benefit programs, as well as providing nearly 10,000 advisory firms with investment and technology solutions to invest their own clients’ money. Privately held for 70 years, Fidelity employs 45,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit https://www.fidelity.com/about.

Diversification/asset allocation does not ensure a profit or guarantee against loss.

Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or
lose money.

The investment risk of a target date fund changes over time as the fund's asset allocation changes. The funds are
subject to the volatility of the financial markets, including that of equity and fixed income investments in the U.S. and
abroad, and may be subject to risks associated with investing in high-yield, small-cap, and foreign securities.
Principal invested is not guaranteed at any time, including at or after the funds' target dates.

Past performance is no guarantee of future results.

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

778715.1.0

© 2016 FMR LLC. All rights reserved.

¹ Analysis based on 22,000 corporate defined contribution plans and 14.5 million participants, as of September 30, 2016. These figures include the advisor-sold market, but exclude the tax-exempt market. Also excluded are non-qualified defined contribution plans and plans for Fidelity’s own employees. Fidelity’s IRA analysis based on 8.2 million IRA accounts.
² Participants who have been employed with the same plan sponsor for 15 years.
³ Millennial generation includes individuals born between 1981 and 1997, as defined by Pew Research.
⁴ Does not include Fidelity participants who have their 401(k) assets in a managed account.
⁵ Fidelity recordkept data of HSA accounts as of Dec. 31, 2015.
⁶ Estimate based on a hypothetical couple retiring in 2016, 65-years-old, with average life expectancies of 85 for a male and 87 for a female. Estimates are calculated for “average” retirees, but may be more or less depending on actual health status, area of residence, and longevity. Estimate is net of taxes. The Fidelity Retiree Health Care Costs Estimate assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government’s insurance program, Original Medicare. The calculation takes into account cost-sharing provisions (such as deductibles and coinsurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance). It also considers Medicare Part D (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by Original Medicare. The estimate does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care. Life expectancies based on research and analysis by Fidelity Investments Benefits Consulting group and data from the Society of Actuaries, 2014. The Fidelity Retiree Health Care Costs Estimate assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government’s insurance program, Medicare. The calculation takes into account cost-sharing provisions (such as deductibles and coinsurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance). It also considers Medicare Part D (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by Medicare. The estimate does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care.