Recent analysis reveals that 401(k) balances vary significantly across different industries, reflecting disparities in pay and savings behaviors among workers. According to data from Fidelity Investments, which manages a substantial number of 401(k) plans, industry-specific insights can provide valuable benchmarks for individuals assessing their retirement preparedness.
In the first quarter of the year, the average 401(k) balance among investors on Fidelity’s platform stood at $125,900. This figure, however, varies considerably when broken down by age groups: baby boomers averaged $241,200, Generation X $178,500, millennials $59,800, and Gen Z $11,300.
Fidelity’s Vice President of Thought Leadership for Workplace Investing, Mike Shamrell, highlighted that understanding industry-specific savings patterns helps employers tailor their 401(k) offerings to attract and retain talent effectively. “Many companies are engaged in a competitive hiring environment and view their retirement benefits as a crucial aspect of their employee value proposition,” Shamrell explained.
Industries characterized by higher pay scales tend to exhibit higher average 401(k) balances. For instance, legal services tops the list with an average balance of $306,400, followed closely by petrochemicals at $255,500, and energy production/distribution at $214,400. Conversely, industries such as retail trade ($51,200), health care excluding physicians ($66,600), and real estate ($70,700) have lower average balances.
While 401(k) balances offer insights into retirement savings, financial experts emphasize that the total savings rate is a more accurate measure of long-term financial security. Fidelity recommends individuals aim to save 15% of their pre-tax income, including employer contributions, towards retirement. Currently, Fidelity’s participants have an average total savings rate of 14.2%, aligning closely with this guidance.
Industries with the highest total savings rates include pharmaceuticals (19.7%), petrochemicals (19.1%), and airlines (18.4%). Conversely, sectors like retail trade (10.4%), health care excluding physicians (10.9%), and construction and scientific/technical services (both 12.3%) have lower savings rates.
Employer contributions play a significant role in bolstering savings rates, with average employer contribution rates varying across industries. Sectors like petrochemicals (8.2%), pharmaceuticals, and airlines (both 7.8%) exhibit higher contribution rates, whereas industries such as health care excluding physicians (2.9%), retail trade (3%), and scientific/technical services (3.1%) have lower rates.
Despite these positive trends, challenges persist, including the prevalence of 401(k) loans among participants, affecting 17.8% of Fidelity’s plan holders. Such loans can detract from retirement savings progress, underscoring the importance of consistent saving habits and prudent financial planning.
As industries continue to navigate economic uncertainties and evolving workforce dynamics, understanding these nuances in retirement savings can empower individuals and employers alike to make informed decisions toward achieving financial stability in retirement.
