Fidelity: Average 401k Balance Dropped 4 Percent in First Quarter of 2026

Fidelity Investments reported that the average 401k balance fell 4 percent to $141,000 in the first quarter of 2026, as market volatility tied to the Iran war triggered a significant stock selloff early in the year.

Average IRA balances also dropped 4 percent to $131,380 during the same period.

The decline in balances came alongside a rise in workers tapping their retirement accounts. The share of workers taking hardship withdrawals rose to 2.5 percent in the first quarter, up from 2.3 percent the previous year. About 19.2 percent of workers held an outstanding 401k loan at the end of the quarter, up from 18.8 percent a year earlier.

Financial experts describe the trend as a warning sign of broader household financial distress. Persistent inflation and rising costs for groceries, gas, and transportation have left many households with limited emergency savings, pushing them to use retirement funds for immediate needs.

Some employers have made the situation worse by pausing or reducing their 401k matching contributions as part of cost-cutting measures. Reduced employer matches lower the total flow of funds into employee accounts and reduce the long-term compounding effect.

Hardship withdrawals carry significant risks. They can trigger taxes and a 10 percent penalty, and they permanently reduce the account balance available for retirement. Experts say early withdrawals are particularly damaging for middle-income earners who are already behind on retirement savings benchmarks.

Financial advisors recommend building an emergency fund of three to six months of expenses to avoid tapping retirement accounts during financial stress. Workers who have already taken hardship withdrawals are encouraged to increase their contribution rates as soon as their finances stabilize.