According to data recently released by Fidelity Investments, Americans are getting more serious about saving for retirement. Since 2012, average individual retirement account contributions at Fidelity have increased 5.7% to $4,150 – a record high level. Further, the average account balance among all 7 million IRA accounts at Fidelity has risen 10% to $89,100, also a record high, due in part to the rising stock market. A further encouraging sign is that younger investors in their 20s, 30s, and 40s increased their contribution rates by 3.9%, 6.7% and 6.2%, respectively.
Ken Hevert, vice president at Fidelity, is optimistic due to these recent patterns: “The fact that IRA contributions are up across all age groups is a positive indication that many people are indeed committed to saving for retirement.” Given that the maximum annual contribution to an IRA is $5,500, Hevert believes there is still room for improvement. However, the average 2013 contribution to traditional IRAs was exceeded by those put towards Roth IRAs, at $4,690 as opposed to $4,027. This can partly be explained by the fact that a traditional IRA provides an up-front tax deduction (with income tax paid on withdrawals) whereas a Roth IRA has no tax deduction on contributions, with withdrawals being tax free.
Does this trend indicate that Americans have shaken off the jitters that followed the financial crisis of 2008? Fidelity’s research seems to suggest so, with many individuals being confident enough with the short term to prepare for the long haul in retirement.
Tags: fidelity investments, ira, ken hevert, MarketWatch, retirement, roth ira
