This Is the Average IRA Balance. How Does Yours Compare?

Since Social Security won't provide enough income to sustain seniors in retirement, it's imperative that we all take steps to save on our own. But how well are Americans doing in that regard?

Unfortunately, because of the COVID-19 crisis, retirement plan values have dropped since last year, according to Fidelity. Back in late 2019, the average IRA balance was $115,400, but as of the first quarter of 2020, it's $98,900. That's a 14% drop from the previous quarter, and a $16,500 decline.

IRA sign with right-pointed arrow beneath it in front of a blue sky backdrop


A temporary blip, most likely

If your IRA balance compares to that of the average American, and you've seen it go down since COVID-19 took hold, take comfort in the fact that you're in good company. And, take comfort in the fact that the declines you're seeing are likely just temporary.

The good thing about investing for retirement is that you're looking at a lengthy wealth-building window. And while it's never fun to see your balance drop, once the COVID-19 crisis subsides and the economy is able to strengthen, there's a good chance your IRA will regain the value it lost -- and then some.

Stay the course

If you're out of work right now, you may not have the ability to keep funding your IRA. But if your paycheck has held steady throughout the ongoing ordeal, it still pays to contribute to your IRA, with the goal of maxing out if that's possible. If you're under the age of 50, maxing out means contributing $6,000 to that account this year. If you're 50 or older, you get a $1,000 catch-up that raises that limit to $7,000.

Keep in mind that if you save for retirement in a traditional IRA, you'll get an immediate tax break on the money you contribute. With a Roth IRA, your contributions won't be tax-free, which is the case for a traditional IRA. Rather, your investments in that account will get to grow tax-free, and withdrawals will be tax-free in retirement.

That's not the case with traditional IRA withdrawals -- you'll pay taxes on those in retirement, and your account will also be subject to required minimum distributions. Still, saving in an IRA is a smart move no matter which account type you opt for. You can even divvy your savings up between a traditional and Roth IRA if you so choose.

Get your savings on track -- when you can

While we may know what the average IRA balance looks like right now, we don't know how that number looks by age. If you're in your 20s and aren't close to having $98,900 in your IRA, worry not -- you've probably only had a limited amount of time in the workforce, and you have plenty of time to fund your account steadily and grow its balance through the years. But if you're in your 40s or 50s with well under $100,000 in your IRA, that's a different story. And in that case, you'd be wise to ramp up your contributions once you're in a stable enough financial position to do so.

To be clear, now's not the time to beat yourself up over slacking on the IRA front if you're out of work, holding down a job but still struggling, or just plain having a hard time coping with the ongoing crisis. But if you're behind on long-term savings, pledge to boost your contribution rate once things get back to normal.

Though IRAs have taken a beating from COVID-19, saving in one is still a great idea. And if your balance is down, don't despair, and also, don't keep checking it obsessively. Rather, give your IRA time to recover, and do your best to keep funding it if that's a possibility.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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