Fidelity on 401(k)s: Keep saving despite volatility, avoid hardship withdrawals

The Iran war rattled financial markets in early 2026, and American retirement savers felt it directly. First-quarter data from Fidelity, the country's largest 401(k) provider, show average account balances fell for the first time in several quarters as volatility hit portfolios across every retirement account type.

The more important story in the data is not the balance decline, however. It is what Americans did in response to the pressure, both good and bad, and what Fidelity's own executives are now warning about going forward.

What Fidelity's 401(k) data show on balances, savings

The average 401(k) balance fell 4% to $141,000 in the first quarter of 2026, and the average IRA balance fell 4% to $131,380, driven by severe market volatility tied to the escalating U.S.-Iran conflict, according to the Fidelity's analysis.

The analysis covers more than 54 million retirement accounts, including 25.6 million 401(k) participants across 26,800 corporate plans.

Despite the balance drop, the savings behavior data paint a more resilient picture. The total 401(k) savings rate hit a record 14.4%, approaching Fidelity's suggested rate of 15%, and the total 403(b) savings rate also hit a record 12%.

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IRA contributions surged 29% year over year, with the number of account holders contributing hitting an all-time high, up 28% from Q1 2025.

Only 5.7% of participants changed their asset allocation during the quarter, down from 6% a year ago. Eighteen percent increased their savings rate, largely through automatic annual increases.

The average quarterly employer contribution hit a record $2,080, surpassing the previous high of $2,020 a year ago, according to the Fidelity press release.

Why Fidelity warns about hardship withdrawals, 401(k) loans in Q1 2026

Alongside the record savings rates, Fidelity's Q1 data show that more Americans are pulling money out of retirement accounts to cover immediate financial needs. The share of workers with an outstanding 401(k) loan rose to 19.2% at the end of the quarter, up from 18.8% a year earlier. About 2.4% of workers took out a new loan in Q1 alone, up from 2.3% in 2025, the Fidelity press release shared.

Hardship withdrawals climbed from 2.3% to 2.5% over the same period. Kirsten Hunter Peterson, a vice president at Fidelity, told CNBC that most hardship withdrawals run under $2,000 and are individually not catastrophic.

The pattern she is watching, however, is workers taking more than one hardship withdrawal in a year, which she described as a warning sign, according to CNBC.

The tension in the data is visible at the aggregate level. Savings rates are at record highs, yet hardship withdrawals are rising.

Both trends are real, and they are happening in the same workforce at the same time, reflecting a two-speed financial reality inside the American economy.

Fidelity advises staying the course during market volatility

Sharon Brovelli, president of Workplace Investing at Fidelity, used the Q1 report to deliver a message to retirement savers rattled by the Iran war volatility.

"Retirement savers started the year strong with record-high savings rates and contributions, reflecting the long-term approach they're taking with retirement preparedness," she said. "While it can be tempting to make changes to retirement savings during market volatility, it is positive to see participants stay the course," according to the Fidelity press release.

The data support her message. Even though average balances fell quarter over quarter, the year-over-year picture is considerably better. The average 401(k) balance was still up 11% from Q1 2025.

The Iran war selloff in March compressed balances in the short term. Workers who kept contributing through the volatility are positioned to benefit from any subsequent market recovery.

Key figures from Fidelity's Q1 2026 retirement analysis not covered above:

• Roth adoption is accelerating sharply: Roth IRAs now represent 67% of all IRA contributions in Q1, and Roth conversion transactions increased 41% year over year. Bob Mascialino, president of Wealth at Fidelity, said "choices like increasing contributions to Roth accounts reflect a focus on flexibility, tax efficiency, and confidence in planning for the future."
• Equity compensation is emerging as a retirement savings gateway: 43% of stock plan participants say they became first-time investors through their company's stock plan, and 73% plan to use equity compensation proceeds for long-term investing; 56% say equity compensation makes them more likely to stay with their employer.
• The long-term saver cohort tells a more optimistic story: Participants who have been in their 401(k) plan for 15 or more years had an average balance of $564,600 at the end of Q1 2026, and those saving continuously for 10 or more years had an average balance of $375,200, demonstrating the power of compounding over market cycles.
• Gen Z savers are showing the strongest contribution momentum of any generation: Gen Z participants increased their average savings rate by a larger percentage than any other age group in Q1, and Gen Z IRA account holders grew significantly year-over-year, making them the fastest-growing cohort in Fidelity's retirement system.
• Auto Portability adoption is accelerating inside Fidelity's network: since launching in October 2022, more than 9,200 Fidelity 401(k) plans have adopted Auto Portability, which automatically moves small retirement balances when workers change jobs rather than letting them cash out; the program has preserved $24 million in retirement savings that would otherwise likely have been withdrawn.
  
  Source: Fidelity press release

What the Fidelity 401(k) data mean for Americans, broader economy

The Q1 2026 Fidelity report arrives at a moment when retirement accounts have become one of the most sensitive gauges of household financial health in America. The record savings rates confirm that millions of workers are still building long-term wealth with discipline, even during a geopolitical shock.

Rising hardship withdrawals and loan activity confirm that a significant and growing minority is under enough financial pressure to treat their retirement account as an emergency fund.

The economic implications extend beyond individual households. Consumer spending drives roughly two-thirds of U.S. GDP, and retirement account stress is one of the early indicators that household balance sheets are under pressure.

Workers taking hardship withdrawals to cover housing costs and medical bills have less discretionary spending capacity. That constraint, multiplied across millions of households, is a drag on economic consumption that does not show up cleanly in headline employment or GDP figures.

The hardest group to reach with this data is the one that needs it most. Workers under the most financial pressure are the least likely to have emergency savings as an alternative to tapping retirement funds.

Brovelli's message to stay the course is the right long-term advice. The harder problem is that for a growing number of American workers, staying the course and covering the bills have become mutually exclusive.

Related: Congress research arm warns Americans on 401(k), IRA penalty

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This story was originally published June 8, 2026 at 11:33 AM.