00:00 Speaker A
The average 401k savings rate increased to a record high in the first quarter according to fidelity. Here with the numbers, we’ve got Yahoo Finance senior columnist, Carrie Hannon. Carrie, what do we know here?
00:13 Carrie Hannon
Yeah, hi Brad. Um yeah, those fidelity numbers are quite impressive in the sense that people are saving at record high savings rate, um, as close to the recommended 15% uh, that it’s ever been. It’s at 14.3% in the first quarter of this year and about 9.5% of that is the employer match. But this is really encouraging. In addition, they found that that about, um, 20% of people actually increased uh, the amount that they put into these accounts. And so by increasing their savings contributions each year, very a very small percentage actually changed their asset allocation. Now you’ve got to remember balances did drop down, but we had a pretty rocky first quarter. It was a fairly chaotic. And frankly, I’m a little surprised that there wasn’t more asset allocation changing. But let’s look behind the numbers. Uh, Brad, why this is, in many ways is that um, two things of the 25,000 employer plans that fidelity represents, um, 62% of them are in target date funds. So a target date fund is, it gives people this, as Mike Shamrell from fidelity told me this morning, it keeps people from tinkering. They have a little piece of mind when people get crazy, when the markets get crazy because it automatically adjusts you be uh, based on your uh, retirement date allocation. So this is a good thing. And also, um, it’s very important to remember that many employers are now offering auto escalation. And so that means that each year, they automatically up the the contribution limit from each employee. And so up to 10%, they they usually do about 1% a year. So this has really become a big force in the 401k industry, and it’s really helps people sock more away for retirement, even in rocky times. It’s they stay the course, and that’s encouraging.
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