A ‘Better’ Than Averages Report

  There were some good headlines about 401(k)s last week — but the numbers underneath those “averages” were even better.

Those headlines — reporting on Fidelity’s Building Financial Futures: Q1 2025 report — noted that savings rates hit a record high in Q1, driven by a milestone employee contribution rate of 9.5%, and an employer contribution rate of 4.8% — the highest level to date in that survey. Those types of increases have previously been noted in surveys by the Plan Sponsor Council of America, but this one commented that the combined savings rate of 14.3% is the closest it’s ever been to Fidelity's suggested savings rate of 15%. 

That said, when you look inside those averages — Fidelity noted that Boomers[i] actually had a total savings rate of 17.2%, buoyed by a 12% employee savings rate, while Gen Xers had a 15.4% total savings rate (a 10.3% employee savings rate). Gen Z’s 7.3% employee savings rate and Millennials’ 8.8% rates — although robust for their life stages — actually dampened the “averages.”


Not as widely covered was that 17.4% of participants increased their contribution rate during the quarter (though 4.9% decreased it) — but here it was the younger generations leading the way, with 19.2% of Gen Zers and 18.1% of Millennials upping their “ante.” And while, on average, 61.9% had all their money invested in a target-date fund, that was 81% of Gen Z, but just 44.6% of Boomers. 

‘Average’ Bearings

All of those results, of course, are “averages” — though they are at least segmented by demographic groups that mitigate at least some of the distortions in the broad average.  

To their credit (and the positioning of Fidelity in their press release), most of the industry trade press focused on the increase in savings rate. Unfortunately, most of the “regular” press chose instead to headline the part about a drop in the average balances attributed to market volatility (3% in 401(k)s and 4% in 403(b)s). But while we’re on the subject of “averages,” while the “average” 401(k) balance[ii] at Fidelity was $127,100 — the “average” for Boomers was nearly twice that ($239,600).

Look, that “average 401(k) balance” includes a broad array of circumstances: participants who may (or may not) have a DB program, who are of all ages, who receive widely different levels of pay, who work for employers that provide varying levels of match, and who live (and may retire) in completely different parts of the country (and who experience very different costs of living). “Averages,” as “easy” and tempting as they are mathematically, can obscure — and even distort — those very significant differences. 

Which is why — when it comes to assessing reality — it’s better to look BEYOND the “averages.”

  • Nevin E. Adams, JD

 

[i] Generations as defined by Pew Research: Baby Boomers are individuals born between 1946 – 1964, Gen X are individuals born between 1965-1980, Millennials include individuals born between 1981 – 1996 and Gen Z includes individuals born between 1997 – 2012. 

[ii] That said, here are some points to keep in mind when trying to discern trends from “averages”: Why an Average 401(k) Balance Doesn't 'Mean' Much.

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