Fidelity’s latest first-quarter data shows that retirement savers felt the impact of sharp market swings, with the average 401(k) balance falling 4% to $141,000. The average individual retirement account balance also declined 4% to $131,380, reflecting how quickly portfolio values can move when markets turn volatile.
The declines came during a turbulent stretch tied to the Iran war, which triggered a broad stock selloff. Fidelity Investments said the drop followed severe market volatility earlier in the year, although markets later recovered and moved to new highs.
Market losses hit retirement accounts
The downturn was especially visible in major U.S. stock indexes after the U.S. and Israel attacked Iran on Feb. 28. In March, the S&P 500 fell 5.1% for its worst monthly performance since 2022, while the Dow dropped 5.4% and the Nasdaq declined 4.8%.
Those losses did not last forever. By Wednesday’s close, the Dow Jones Industrial Average was up about 5.3% for the year, the S&P 500 had gained nearly 10%, and the Nasdaq Composite had risen 14.8%. Fidelity’s Kirsten Hunter Peterson said the environment improved after the early-year slide, noting that markets were “trending in a much better direction.”
More workers tapped savings for cash
At the same time, more workers turned to their 401(k) accounts for help with short-term cash needs. Fidelity said 19.2% of workers had an outstanding loan at the end of the first quarter, up from 18.8% a year earlier.
New borrowing also inched higher, with 2.4% of workers taking a new 401(k) loan in the first quarter compared with 2.3% in 2025. Hardship withdrawals, which can be taken without an early-withdrawal penalty for an “immediate and heavy financial need,” rose to 2.5% from 2.3%.
That pattern points to broader strain in household budgets as prices for essentials such as groceries and gas remain elevated. Experts say many families have less room to absorb unexpected costs, which can push them toward retirement savings even when markets are weak.
Why hardship withdrawals matter
Fidelity’s Hunter Peterson said many hardship withdrawals are for less than $2,000, which she described as “not so significant.” But repeated withdrawals in a single year can signal a more precarious financial situation, and that is the group Fidelity says deserves closer attention.
Certified financial planner Douglas Boneparth, president and founder of Bone Fide Wealth in New York City, said a hardship withdrawal should be treated as a last resort. Early withdrawals can bring taxes and a 10% penalty, and the long-term damage from lost compounding can be even greater.
Boneparth also said the behavior reflects “broader pressure across household finances as inflation and elevated living costs continue squeezing consumers.” He added that withdrawing money during a market downturn can make it harder to recover lost ground later.
Most savers kept contributing
Even with the turbulence, most retirement savers continued to add money to their plans in the first quarter. Fidelity said automatic features such as auto-escalation helped keep contributions moving higher, as the setting raises savings rates over time, often by one percentage point a year.
The average 401(k) contribution rate, including both employer and employee money, rose to 14.4%, a record high and just below Fidelity’s suggested savings rate of 15%. Sharon Brovelli, president of Fidelity’s workplace investing, said it was positive to see participants stay committed to saving despite market volatility.
Boneparth said households that can handle sudden affordability problems usually have even a small emergency cushion. For families with tight monthly cash flow, he suggested directing a modest amount, such as $25 to $50 a month, into a high-yield savings account before making cuts to retirement contributions.
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