Last year’s market slump proved a significant blow for retirement savers. The share of investors with $1 million or more in their 401(k)s and IRAs dropped by almost 30%, as per the latest data provided by Fidelity Investments. 

The management company handles over 35 million retirement accounts. However, it reported only 299,000 401(k) millionaires and roughly 280,300 IRA millionaires by the end of Q4 2022. This was a significant decrease from the same period in 2021, when there were 442,000 and 376,000 millionaires in 401(k)s and IRAs, respectively. 

Furthermore, it is a stark contrast to the end of 2020. At that time, Fidelity recorded 334,000 401(k) millionaires and 288,300 IRA holders with seven-figure accounts.

The numbers could be higher, as some individuals hold multiple accounts with Fidelity. Nevertheless, the decline is not entirely surprising, given that the S&P 500 had a 20% decline last year. Meanwhile, many households struggle with the ever-rising cost of living, depleting their savings to pay bills.

While the decline is significant, it is not the norm. The average IRA balance was at $104,000 at the end of 2022, a 20% drop from 2021. Similarly, the average 401(k) balance was at $103,900. Another report from Vanguard revealed that the average 401(k) balance declined by about a fifth in 2022.

On the brighter side, Gen Z shows more awareness of the importance of saving for retirement. Despite the shaky stock market, the average account balance for young workers increased by 14% compared to the end of 2021. Although their balances are small, given their age, they are making the most of starting to invest young.

Despite the market’s turbulence, savers remain resolute and are not shying away from investing in their retirement accounts. Over a third increased their contribution rate last year, with the average 401(k) account holder boosting theirs by 2.6%.

A $1 million retirement fund has been a long-term goal for savers. However, financial advisors suggest that some individuals should aim for more than $1 million. The final number depends on their location, lifestyle, and other goals, for a comfortable retirement.

The data’s pessimistic tone reinforces the need for everyone to take a more severe approach to retirement planning. It is crucial to be diligent and consistent in retirement savings, irrespective of the market conditions. It is a challenging journey, but it is worth the effort.