Our retirement plans stall after reaching record highs

Golden egg

The average balance in our 401(k) plans fell slightly this spring due to a mediocre bond market.

So if you noticed your retirement account was pretty sluggish during the second quarter — April through June — you weren't alone.

The average 401(k) balance dropped from a record $80,900 in the first quarter to $80,600 in the second quarter, according to Fidelity Investments, a Boston-based mutual fund company whose quarterly reports are one of the best benchmarks for judging the progress of your 401(k) retirement plans.

That isn't a huge fall, but it means that we can't really justify any kind of celebration, even though our balances are up nearly 11% year over year.

Much of the decline in our 401(k)s from first to second quarter was due to the bond market.

Most people hold a combination of stocks and bonds in their 401(k) plans — 60% stocks and 40% bonds is the classic split.

Typically, the younger you are, the more stocks you'll have, and the older you are, the more bonds you'll hold.

The stock markets were up slightly in the second quarter, but bond prices were down.

So bond performance outweighed stock performance and caused the average to fall.

Of course, while the market plays a big part in where our balances land, we can't discount the importance of contributions.

The younger crowd — those born since 1979 — just aren't saving like they need to be, notes the Fidelity report.

“While it’s a good sign that some workers are increasing their savings for retirement, many younger workers — especially Millennials — aren't saving at the recommended 10% to 15% of their income,” James MacDonald, president of Workplace Investing at Fidelity Investments, said in a news release.

That's too bad, because the more we save now, the better off we'll be in our leisure years.

A 25-year-old who starts contributing an extra $50 per month could reap an additional $230 to $390 per month in retirement, assuming a 5.5% to 7% rate of return, according to Fidelity data.

And a 35-year-old tucking away an extra $60 per month could take home an extra $140 to $220 per month.

In other words, it takes only relatively small and consistent contributions starting early on in life to significantly increase your retirement income.

And contributing at a younger age has a bigger impact.

That's a pretty convincing argument for upping contributions ASAP, maxing out the old 401(k) or Individual Retirement Account, and sticking with it.

“It is critical young workers realize that even the smallest increase to their monthly savings today of just 1 percent — whether in a 401(k) or an IRA — could have a meaningful impact on their retirement paycheck down the road," MacDonald said.

I think everyone can benefit from that advice, but it's especially important for my generation to take notice.

We have to do what we can with the cards we've been dealt.

If you did end up increasing your balance quarter to quarter, congrats! Tell us your secret.

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