401(k) balances drop 4% in 2026 as Americans continue to save for retirement; what to know about recent trends, changes
401(k) retirement accounts fell in early 2026, with several Americans checking retirement savings following a turbulent start to the year. Average 401(k) balances dropped 4% between the end of 2025 and March 2026, according to a Fidelity Investments report.
The stock market was unstable in the first few months of 2026. The Dow Jones crossed 50,000 points for the first time on February 6, but later fell nearly 11% by late March after U.S. air strikes and the ongoing Iran war, as cited by USA Today.
Despite market swings, the losses were not as severe as many feared. Average retirement account balances fell only 4% during the quarter, according to the Fidelity report.
The number of 401(k) millionaires declined. Fidelity reported 645,000 people with at least $1 million in their 401(k) accounts in Q1 2026, down 3% from the previous quarter. However, there are still more 401(k) millionaires than a year ago. The number was 26% higher than in Q1 2025.
401(k) millionaires fall in 2026
IRA millionaires also declined. The number of people with at least $1 million in their IRA accounts fell 2% to 571,622. IRA millionaires remain much higher than last year. Their numbers were 32% higher than the first quarter of 2025. Becoming a retirement millionaire takes time. Fidelity said these investors usually contribute regularly to the same retirement account for many years.
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The average 401(k) millionaire is nearly 59 years old. They have typically invested in the same account for about 25 years, as noted by Fidelity. More workers are borrowing money from their retirement savings. The share of workers with outstanding 401(k) loans rose to 19.2% in Q1 2026. This is an increase from two years earlier. In Q1 2024, only 17.8% of workers had a 401(k) loan.
More workers taking 401(k) loans
More people are taking new loans from their 401(k) plans. About 2.4% of participants started a new loan in Q1 2026. The average new 401(k) loan was $8,420. This figure was reported by Fidelity. People with loans owe even more on average. The average outstanding loan balance was $10,550. Many workers borrow because they lack emergency savings. This was stated by Kirsten Hunter Peterson, Vice President of Workplace Thought Leadership at Fidelity.
A 401(k) loan allows workers to borrow from their retirement savings. The money is usually repaid over five years with interest. Loan repayments go back into the worker’s retirement account, as explained by Fidelity. A 401(k) loan can help avoid taxes and penalties linked to early withdrawals. Workers may face problems if they leave their jobs.
Fidelity said 401(k) loans often need to be repaid when someone changes jobs or loses employment. Repayment deadlines can be short. Some plans may require repayment within 30 to 90 days. Failing to repay can become expensive. Workers under age 59½ may face taxes plus a 10% penalty on the unpaid loan balance.
What happens if you can’t repay a 401(k) loan?
The IRS allows hardship withdrawals in certain situations. These exceptions can help people avoid the 10% penalty before age 59½. Taxes still usually apply on hardship withdrawals, noted by the IRS. Not every expense qualifies as a hardship. The IRS said purchases such as a boat or television do not qualify. Certain major expenses can qualify. Examples include funeral costs, medical expenses, buying a primary home, or avoiding eviction and foreclosure, according to the IRS.
Workers must show they cannot get the money elsewhere. This is one requirement for hardship withdrawals. Many Americans increased retirement savings despite economic uncertainty, as highlighted by Fidelity. Nearly one in five workers saved more. About 18% of participants increased their retirement contribution rate in Q1 2026. Automatic increases helped boost savings. Many employers automatically raise contribution rates each year. Some workers also chose to save more on their own.
Americans continue saving for retirement
The total retirement savings rate reached 14.4%. This includes both employee and employer contributions. The savings rate is close to Fidelity’s recommended target. Fidelity suggests a combined savings rate of 15%. Employer contributions reached a record level. The average employer contribution hit $2,080 in Q1 2026. This was higher than the previous record. The earlier high was $2,020 a year ago.
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The average Fidelity 401(k) balance stood at $141,000, this figure was reported for Q1 2026 by Fidelity. Balances were lower than the previous quarter. The average account balance was down 4% from Q4 2025. But balances were still higher than last year. Average balances were 11% above Q1 2025 levels. Long-term growth remains strong. Balances were 14% higher than five years ago. Retirement balances have risen sharply over a decade. They were 61% higher than in Q1 2016.
401(k) balances still higher than last year
Younger investors may have felt bigger losses. They often invest more heavily in stocks, which are more volatile. Older workers generally have more diversified portfolios. Many hold a mix of stocks, bonds and money market funds. The Dow Jones Industrial Average fell 3.6% during the first quarter, as per the Fidelity market data cited by USA Today. The market recovered somewhat in May. The Dow again closed above 50,000 points in several days.
Retirement account balances depend on several factors. These include employee savings, employer contributions, investment choices and market performance. Diversification helped protect some investors, as explained by Fidelity’s Kirsten Hunter Peterson. Target-date funds remain a popular option. These funds automatically adjust investments as retirement approaches.
Older investors in target-date funds gradually move toward bonds. Roth 401(k) plans are becoming more popular among young workers. More than one in five Gen Z workers used a Roth 401(k). Participation reached 21.4%, according to Fidelity. Most employer plans now offer Roth options. More than 95% of Fidelity-managed plans include a Roth 401(k), according to Kirsten Hunter Peterson. Roth 401(k) withdrawals can be tax-free in retirement. Certain rules must be met.
Roth 401(k) gains popularity among Gen Z
Workers do not receive an upfront tax break with Roth contributions. This differs from traditional 401(k) plans. Traditional 401(k)s provide tax deductions today. However, withdrawals are taxed later. Younger workers may benefit more from Roth accounts. They often face lower tax rates early in their careers, according to Kirsten Hunter Peterson. High-income earners can also use Roth 401(k)s. Fidelity noted there are no income restrictions on Roth 401(k) contributions.
Roth IRA rules are different. Income limits apply to Roth IRA contributions. IRA contributions reached record highs. Fidelity said strong demand for Roth IRAs helped drive growth. Most IRA contributions went into Roth accounts. Around 67% of IRA contributions were directed to Roth IRAs. Roth conversions surged. Conversion transactions increased 41% year-over-year.
While 401(k) balances fell 4% in early 2026 due to market volatility, Americans continued saving, employer contributions hit record levels, and long-term retirement growth remained positive, according to Fidelity.