401(k) balances plummet as financial markets bruise

If you are thinking of retiring soon, you may need to think again.

A new report from Fidelity reveals that the average 401(k) balance has declined for the third consecutive quarter. It is now down 23% from a year ago at $97,200.

The average Individual Retirement Account balance also fell 25% from a year ago to $101,900.

The market has taken dramatic turns this year,” observed Kevin Barry, president of Workplace Investing at Fidelity Investments.

He noted that even though retirement savings have dwindled, many Americans are still saving money for their golden years.

“Retirement savers have wisely chosen to avoid drama and continue to make smart long-term choices,” Barry said. “This is important because one of the most critical aspects of a good retirement savings strategy is contributing regularly enough…to help you reach your goals.”

True. But that does not lessen the potential danger facing millions of Americans.

The sad reality is that 401(k)s were never intended to be the only retirement plan for workers. They were rolled out in the 1970s to complement existing retirement programs, such as pensions.

Unfortunately, most private employers quickly realized they could dump their expensive pensions and steer workers into state-of-the-art 401(k) plans as a way to save for retirement.

Initially, many companies offered generous rewards to attract employees to 401(k). Gradually, these matches became less generous or disappeared altogether.

I can’t say it enough: make sure you’re saving for your years to come.

This is especially true as some lawmakers seek to cut Social Security and Medicare benefits. For many Americans, their 401(k) savings will be their main retirement nest egg.

Market volatility is something over which you have no control. Regular contributions to your 401(k), on the other hand, are within your reach.

And start as early as possible, children. Google “compound interest”. See how funds can grow over time.

None of this is easy, of course. But our political and corporate leaders seem determined to make it your problem, not theirs.