Is This the Downside of Record-High 401(k) Contributions?

Photo (cc) by GotCredit

The good news is that 401(k) contributions are breaking new records and overall balances are at near-record levels.

The bad news is that loans from 401(k) accounts are also setting new highs.

That’s according to Fidelity Investments‘ latest quarterly analysis of the retirement savings it administers, both 401(k) accounts and individual retirement accounts (IRAs).

Average total balances in 401(k) accounts dipped slightly in the second quarter, to $91,100. But they remain near the record level of $91,800 reported at the end of the first quarter.

Meanwhile, the average 12-month total savings amount for 401(k)s, which includes employee and employer contributions, reached $10,180 at the end of the second quarter of this year. That’s a record high and the first time that figure has surpassed $10,000.

Average total balances in IRA accounts stood at $96,300 at the end of the second quarter. That compares with $94,000 at the end of the first quarter.

The average IRA contribution decreased when compared with the end of the first quarter, although Fidelity attributes that primarily to a significant number of people contributing to their IRA in the first quarter to meet the Internal Revenue Service’s April 15 contribution deadline.

Now for the bad news.

As with 401(k) contribution amounts, 401(k) loan amounts are also on the rise. The average loan amount for the prior 12 months reached $9,720 at the end of the second quarter, up from $9,630 at the end of the last quarter and $9,500 a year ago. Fidelity notes:

While average balances have increased over the past several years, higher savings balances could be contributing to increased loan activity among 401(k) account holders.

Fidelity’s report does not discuss the repercussions of borrowing from 401(k) accounts, but we address the pros and cons periodically here at Money Talks News.

For example, Money Talks News founder Stacy Johnson has explained the downsides of 401(k) loans, as well as times when they might make sense. To learn more, read “Ask Stacy: Should I Borrow From My Retirement Account to Pay Debts?

How do your 401(k) balances compare with the second-quarter averages reported by Fidelity? Let us know what you think of the report’s statistics in our Forums. It’s the place where you can speak your mind, explore topics in-depth, and post questions and get answers.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
15 of the Most Outrageously Overpriced Products
15 of the Most Outrageously Overpriced Products

Retailers mark up products by hundreds of times their cost — but you don’t have to pay the premium.

14 Uses for WD-40 That Save Money, Time or Headaches
14 Uses for WD-40 That Save Money, Time or Headaches

WD-40 is handy in a lot more situations than you likely realize.

12 Ways Retirees Can Earn Passive Income
12 Ways Retirees Can Earn Passive Income

These simple ways of earning income without a lot of active, ongoing effort can stretch your retirement dollars.

7 Reasons You Should Change Careers After Age 50
7 Reasons You Should Change Careers After Age 50

Many older workers have the energy and experience to make a successful career change.

Why Cutting the Cord Can Be Confusing — and How to Decide If It’s for You
Why Cutting the Cord Can Be Confusing — and How to Decide If It’s for You

Streaming TV might sound like the antidote to sky-high cable bills, but cutting the cord is easier said than done.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

Why Cloth Masks May Increase Your Coronavirus Risk
Why Cloth Masks May Increase Your Coronavirus Risk

A new study finds that wearing a cloth mask can backfire if you don’t clean it properly.

11 Household Items That Go Bad — or Become Dangerous
11 Household Items That Go Bad — or Become Dangerous

When you get the impulse to stockpile these everyday items, pay close attention to their expiration dates.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

The 15 Worst States for Retirees in 2020
The 15 Worst States for Retirees in 2020

Based on dozens of metrics tied to affordability, quality of life and health care, these are not ideal places to spend retirement.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

This Is the Cheapest Place to Buy a Used Car
This Is the Cheapest Place to Buy a Used Car

Looking for a good deal on a set of wheels? This should be your first stop.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

7 Surprising Features That Boost Your Home Value
7 Surprising Features That Boost Your Home Value

You can add value to your home without hiring a contractor to do expensive renovations.

5 Things That Make Life More Meaningful for Retirees
5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.