According to a Fidelity news release, among all contributing Fidelity participants, the average pre-tax amount employees contributed in the first half of 2008 increased by 1.4% to $3,187 compared with $3,142 in the first half of 2007. Among employees who contributed to the same workplace savings plan in both the first half of 2008 and 2007, the average pre-tax contribution increased by nearly 7% to $3,512 in the first half of 2008.
However, while the analysis shows participants are making retirement savings a priority despite the weak economy, Fidelity found most employees participating in a workplace savings plan are not contributing to the annual limit. As of the end of 2007, only 9% of all workers contributing to their workplace savings plan reached the annual maximum of $15,500.
Among highly compensated employees, nearly four-out-of-ten (38%) contributed the maximum amount, but among the non-highly compensated, just 3.8% did so, the release said.
As workers continued to fund their workplace savings accounts, the average account balance declined. Fidelity found the average participant account balance was down 7.5% to $64,000 at the end of June 2008 from $69,200 at the end of June 2007, due to market impacts. However, the average account balance for those employees who stayed in their plans for both years was down less than 1% to $71,500 at the end of June 2008 from $72,000. By comparison, during this same period, the S&P 500 declined nearly 15%.
The Fidelity analysis found other indicators that retirement plan participants are more inclined to save. " Loans outstanding have been slowly trending down and currently remain historically low," Fidelity said.
At the end of June 2008, 19.2% of workers with a balance in their workplace savings plan had a loan outstanding - down slightly from 19.4% at the end of June 2007 and 19.9% at the end of 2006. In addition, the percentage of workers initiating a loan from their workplace savings plan during the three months ended June 2008 was 2.8% - down from 3.1% at the end of June 2007.
The percentage of workers with a balance in their workplace savings plan who took a hardship withdrawal was up slightly to 0.60% in the three months ended June 30, 2008, from 0.56% in the same period in 2007. However, the percentage of workers taking a hardship withdrawal remains low on an annualized basis, representing just 1.6% of all employees with a balance in their workplace savings account as of the end of June 2008.
"There is no doubt that American workers are feeling the pressure from escalating energy and food prices as well as a slumping real estate market, but the majority are making retirement a priority and staying the course," said Scott B. David, president of retirement services at Fidelity Investments, in the news release.