Fidelity Says Average 401(k) Balances Fall Amid Market Volatility

More savers tapped retirement accounts in early 2026 as financial pressure increased and markets swung sharply after the outbreak of the Iran war, according to new Fidelity Investments data. The company, the nation’s largest provider of 401(k) plans, said the average 401(k) balance fell 4% in the first quarter to $141,000, while the average individual retirement account balance also dropped 4% to $131,380.

The declines followed a steep selloff in March after the U.S. and Israel attacked Iran on Feb. 28. The S&P 500 fell 5.1% in March, its worst monthly performance since 2022, while the Dow Jones Industrial Average dropped 5.4%, ending a 10-month winning streak. The Nasdaq Composite lost 4.8%. Markets have since recovered much of those losses, with major indexes posting gains by the end of Wednesday’s close.

At the same time, more workers borrowed from or withdrew money from their 401(k) accounts to cover cash needs. Fidelity said 19.2% of workers had an outstanding 401(k) loan at the end of the first quarter, up from 18.8% a year earlier. About 2.4% of workers took out a new 401(k) loan during the quarter, compared with 2.3% in 2025. The share making hardship withdrawals also rose, to 2.5% from 2.3%.

Hardship withdrawals are allowed for an immediate and heavy financial need and can be taken without the early-withdrawal penalty that normally applies to retirement accounts. Fidelity said most hardship withdrawals are for less than $2,000, but repeated withdrawals by the same savers can signal deeper financial strain.

Experts said rising costs for essentials such as groceries and gas have left many households with less flexibility to handle emergencies without touching retirement savings. Financial planners warn that early withdrawals can trigger taxes, penalties, and long-term compounding losses, especially when taken during a market downturn.

Douglas Boneparth, president of Bone Fide Wealth in New York City, said using a 401(k) should be a last resort. He advised households with tight cash flow to build even a small emergency buffer, such as saving $25 to $50 a month in a high-yield savings account, before reducing retirement contributions.

Despite the pressure on some households, most retirement savers continued contributing during the quarter. Fidelity said the average 401(k) contribution rate, including both employer and employee contributions, rose to 14.4%, a record high and close to the firm’s suggested savings rate of 15%. Auto-escalation features, which gradually increase savings rates over time, helped keep contributions moving higher.

Sharon Brovelli, president of Fidelity’s workplace investing division, said participants who kept contributing during volatile markets were positioning themselves for stronger retirement outcomes over time.