Retirement Savers Navigate Turbulent Market Conditions in 2025

The first quarter of 2025 has been a rollercoaster ride for retirement savers, with the stock market experiencing on-again, off-again turbulence that has left many investors on edge. Despite the uncertainty, data from Fidelity Investments reveals that average 401(k) retirement account balances have only fallen by 3% from late last year through the first three months of this year, to $127,100. This may seem like a significant decline, but it's worth noting that savers still saw a 1% gain in balances from the first quarter a year ago.

The number of 401(k) millionaires has also taken a hit, with Fidelity reporting that 512,000 savers were 401(k)-created millionaires in the first quarter, down about 4.6% from 537,000 in the fourth quarter of 2024. These savers had at least $1 million in their retirement account. This decline may be attributed to the volatile market conditions, which have made it challenging for investors to predict the performance of their portfolios.

The Impact of Market Volatility on Retirement Savings

The first quarter of 2025 has been marked by significant market fluctuations, with some stocks experiencing steep declines while others rebounded strongly. General Motors stock, for example, was down 10.47% year-to-date from its close of $53.27 a share on Dec. 31, 2024, through the June 2 close of $47.69 a share. Stellantis was down 25% from its close of $13.05 a share on Dec. 31 through its close on June 2 of $9.78 a share.

The worst losses were centered around companies that were impacted by the uncertainty surrounding tariffs and trade war, according to Sam Huszczo, a chartered financial analyst in Lathrup Village. Think Tesla or Nike, who are very dependent on a confident consumer and relying extensively on international markets, manufacturing, and supply chains.

Diversification Key to Riding Out Market Volatility

Despite the market turbulence, many individual investors have managed to navigate the choppy waters without suffering significant losses. Some have even seen their portfolios start to return to positive territory by early May, according to Melissa Joy, president of Pearl Planning, a wealth adviser in Dexter.

The key to riding out market volatility is diversification, said Huszczo. Investors who maintained a diversified portfolio were less likely to experience significant losses, as they had spread their investments across various asset classes and industries.

Fidelity's Recommendations for Retirement Savers

Fidelity recommends that employees aim to save at least 15% of their pretax income each year, including matching money from your employer. This is in line with the federal law called the Secure 2.0 Act, which requires companies with new 401(k) plans and 403(b) plans to automatically enroll eligible employees at a minimum contribution rate of 3%, but no more than 10%.

The employee may opt out, or change the contribution rate if needed. Fidelity also recommends that savers maintain a long-term plan when faced with market volatility, as rapid policy changes, political uncertainty, and the impact of tariffs contribute to a sense of heightened instability.

Retirement Savings Trends in 2025

Despite the challenges posed by market turbulence, most individuals continued to contribute to their retirement savings accounts and invest in the stock market. Of the 6% individuals that made a change to their allocation, 28.2% of those participants moved some of their savings into more conservative investments.

Only 0.9% of 401(k) participants stopped contributing at all to a 401(k) plan in the first quarter. More than 66% of 401(k) participants used a target date fund or managed account, which offers a mix of assets tailored to an individual's age and retirement goals.

Conclusion

The first quarter of 2025 has been a wild ride for retirement savers, with market conditions posing significant challenges. Despite the turbulence, many investors have managed to navigate the choppy waters without suffering significant losses. Fidelity's recommendations emphasize the importance of diversification and maintaining a long-term plan when faced with market volatility.

Retirement savings trends in 2025 suggest that most individuals continued to contribute to their accounts and invest in the stock market. While uncertainty remains, it's essential for investors to stay informed and adapt their strategies as needed to ensure they're on track to meet their retirement goals.