Fidelity Report: Average 401(k) Balances Fall 4% as More Workers Raid Accounts Amid Market Volatility

Fidelity Q1 2026: 401(k) Balances Fall 4% to $141K as Hardship Withdrawals Rise Amid Volatility

Fidelity Q1 2026: 401(k) Balances Fall 4% to $141K as Hardship Withdrawals Rise Amid Volatility - 17GEN4 News - 17GEN4.com

Fidelity Report: Average 401(k) Balances Fall 4% as More Workers Raid Accounts Amid Market Volatility

By 17GEN4 News | May 28, 2026

Workers are increasingly tapping into their 401(k)s for cash even as average account balances declined in the first quarter of 2026, according to new data from Fidelity Investments, the nation’s largest provider of 401(k) plans.

The latest Fidelity Q1 2026 Retirement Analysis (part of its “Building Financial Futures” series) reveals a mixed picture: retirement balances took a hit from market volatility tied to geopolitical tensions, while a growing share of participants turned to hardship withdrawals and loans. At the same time, overall savings rates reached record levels, showing that many Americans are still committed to long-term retirement goals despite short-term pressures.

Key Findings from Fidelity’s Q1 2026 Data

• Average 401(k) balance fell 4% to $141,000 in the first quarter.

• Average IRA balance also dropped 4% to $131,380.

• The share of workers taking a hardship withdrawal rose to 2.5% (up from 2.3% a year earlier). These withdrawals are for “immediate and heavy financial need” under IRS rules and generally avoid the 10% early withdrawal penalty.

• Outstanding 401(k) loans stood at 19.2% of participants (up from 18.8% a year ago), with 2.4% taking out a new loan in Q1.

• Most hardship withdrawals remain relatively small — often under $2,000 — though some workers are taking multiple withdrawals in a year, a sign of ongoing financial strain that Fidelity experts say bears watching.

The declines in balances were driven by severe market volatility earlier in the year, linked to the escalating US-Iran conflict and related geopolitical risks. Markets saw notable selloffs in March before rebounding. As of the most recent closes, the Dow Jones was up about 5.3% year-to-date, the S&P 500 nearly 10%, and the Nasdaq up 14.8%.

Context: Strong 2025 Gains Followed by Q1 Dip

This Q1 pullback comes after strong growth in 2025. By the end of last year, the average Fidelity 401(k) balance had climbed to $146,400 — an 11% increase year-over-year and the third straight year of double-digit gains. The number of 401(k) millionaires in Fidelity plans also rose significantly.Similar trends appeared in other providers’ data. Vanguard reported that 6% of its 401(k) participants took hardship withdrawals in 2025 (up from 4.8% in 2024 and roughly double pre-pandemic levels).

Positive Signs Amid the Pressure

Despite the balance dips and rising withdrawals, Fidelity highlighted encouraging behavior on the savings side:

• The total savings rate (employee + employer contributions) for 401(k) plans reached a record 14.4% in Q1 — very close to Fidelity’s recommended combined rate of 15%.

• 403(b) total savings rates hit 12%.

• IRA contributions surged, with record-high contribution amounts (up 29% year-over-year) and more people contributing.

Fidelity executives noted that automatic features like contribution escalation helped many participants “stay the course” even during volatile markets.

“While it can be tempting to make changes to retirement savings during market volatility, it is positive to see participants stay the course with their contributions — an approach that will ultimately strengthen outcomes as retirement nears,” said Sharon Brovelli, president of Fidelity’s workplace investing division.

Another Fidelity leader, Kirsten Hunter Peterson, vice president of workplace thought leadership, observed that markets have since improved and emphasized monitoring savers who take repeated hardship withdrawals.

Why “Raiding” 401(k)s Is Risky

Financial experts consistently warn against early withdrawals or loans from retirement accounts:

• Hardship withdrawals are generally taxable as ordinary income.

• Loans must typically be repaid (often within 5 years), or they become taxable distributions.

• Money removed loses the power of compound growth — especially damaging if withdrawn during a market dip.

• Even small, repeated withdrawals can significantly erode long-term retirement security.

Fidelity and other experts recommend exploring alternatives first (emergency funds, side income, budgeting adjustments, or 0% APR credit cards) before touching retirement savings.

Broader Economic Picture

The rise in hardship activity reflects persistent household financial pressures — high costs for groceries, housing, gas, and other necessities — even in a period of overall economic growth and strong stock market performance over the longer term. Legislative changes (such as provisions in the SECURE 2.0 Act) have also made accessing retirement funds somewhat easier in certain emergencies.

Bottom Line

Fidelity’s latest report paints a nuanced picture: American workers are saving at record rates and benefiting from long-term market gains, but a growing minority is under enough short-term stress to dip into their retirement nest eggs. The Q1 2026 balance decline was largely market-driven and has been partially offset by subsequent rebounds.For most people, the best strategy remains consistent contributions, diversification, and avoiding early withdrawals whenever possible.

Fidelity Q1 2026: 401(k) Balances Fall 4% to $141K as Hardship Withdrawals Rise Amid Volatility

Fidelity’s latest report shows average 401(k) balances dropped 4% in Q1 2026 due to market swings, while hardship withdrawals increased to 2.5%. Savings rates hit record highs, but experts warn against raiding retirement accounts.

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