Fidelity Investments has released its quarterly analysis of retirement plan savings trends, showing that positive savings behaviors among employees, enhancements to workplace savings plans and strong market conditions in the closing quarter of 2019 caused average account balances to reach record levels yet again.

Fidelity’s data also shows significant balance increases during the 2010 to 2020 decade, reflecting the fact that people who have either entered the market after or remained invested since the Great Recession have been handsomely rewarded.

As of the end of Q4 2019, the average 401(k) balance in Fidelity’s book of business rose to $112,300, a new record high and a 7% increase from the previous quarter’s balance of $105,200. The year-over-year average balance increased 17% from $95,600 in Q4 2018, Fidelity reports.

Also notable is that the average individual retirement account (IRA) balance also rose to a record $115,400, a 5% increase from last quarter and 17% higher than the $98,400 balance one year ago. The average 403(b)/tax exempt account balance increased to $93,100, up 6% from last quarter and an increase of 18% from Q4 2018.

Positive Behaviors Add to Strong Market Gains

The account growth figures are heartening, says Kevin Barry, president of workplace investing at Fidelity Investments, but even more impressive is the fact that employees’ positive savings behaviors are driving the record growth essentially in equal measure as the stock market’s momentum.

“The growth in savings levels over the last 10 years demonstrates the positive impact of taking a long-term approach to retirement, and recent Fidelity research demonstrates workers who do so have reason to feel increasingly confident about their retirement readiness,” Barry says. “However, as we enter a new decade and continue to see markets rise and fall, it’s more important than ever to remember some of the important elements of a successful retirement strategy.”

Barry says these important elements include maintaining consistent savings habits and avoiding the temptation to time the markets; ensuring one’s account has the right balance of stocks, bonds and cash; and continuing to focus on and refine one’s long-term savings goals.

Fidelity’s data shows the average employee savings rate reached a record 8.9% in Q4 2019, while the average total savings rate (i.e., employee contributions plus company match) reached 13.5%, tying the record level last reached in Q2 of last year. Over the course of 2019, 33% of plan participants increased the amount they are saving, with the average increase just over 3%.

The data further shows that, of the workers who increased their savings rates, 40% proactively took steps to do so on their own, while 60% had their savings rate automatically increased through a service within their employer’s retirement savings plan.

Long-Term Savers Shine

Fidelity’s quarterly updates consistently underscore the power of long-term investing, even for those who can only contribute modest amounts on a monthly basis.

In Q4 2019, among individuals who have been in their 401(k) plan for 10 years straight, the average balance reached a record $328,200, topping the previous high of $306,500 from last quarter. Among women in the data set, the average 10-year 401(k) balance grew to $261,000, an increase of 21% from a year ago and the first time the average balance for this group passed the quarter million-dollar mark.

The average 401(k) balance for Millennials who have been in their 401(k) plan for 10 years straight reached $149,800, another record high. Among individuals saving in 403(b)s (or other plans offered by not-for-profit employers) for 10 years straight, the average balance increased to $191,700, nearly five times the average balance for this group in Q4 2009.

No Time for Complacency

While Fidelity’s data gives industry stakeholders reason to celebrate, the promotion of positive savings behaviors among participants remains essential. This is especially true as the equity markets experience bouts of volatility, as was the case last month.

According to the Alight Solutions 401(k) index, a volatile January on Wall Street prompted 401(k) investors to increase ill-timed day-trading activities. There were five days of above-normal activity during the month, which was three more than the combined total of the last four months of 2019.

Investors transferred 0.17% of their balances as a percentage of starting balances. In what seem to be ill-timed trades, they favored fixed income on 12 of the trading days, or 57% of the trading days. Overall, asset classes with the most trading inflows in January included bond funds, which took in 77% of the inflows, followed by target-date funds (TDFs) and international equity funds.

While it makes sense that investors want to purchase safer assets when the equity markets grow volatile, the middle of such a volatility spike is often the worst time to make such trades. Indeed, U.S. bonds were up 1.9% during January—meaning many investors have presumably purchased more expensive bonds that have recently gone up in price. On the other hand, many 401(k) traders seemingly missed a chance to purchase discounted equities, as U.S. small cap equities were down 3.2% during the month, and international equities dropped 2.7%.

What Comes Next

Looking ahead, asset managers seem to agree that they do not expect a recession in the coming year, but they do expect more modest growth in the markets paired with increased volatility—which could shift opportunities to small caps, value stocks and cyclical sectors.

For example, BMO Global Asset Management says that the economic expansion of the past two decades is unlikely to be repeated and that central banks are running out of monetary policy options for the next global economic showdown. The firm’s leaders say that while the U.S. economy has slowed, they do not foresee a recession in the coming year. In fact, given the dovish shift of central banks and reasonable corporate earnings, BMO remains broadly positive on equities and neutral on government bonds due to stretch valuations and ultra-low yields, the firm says in its annual Global Investment Forum outlook report.

In its Solving for 2020 report, Neuberger Berman says it expects increased market volatility in the coming year and the possibility for a recession in 2021 and beyond. Like BMO and many others, Neuberger Berman expects modest economic growth in 2020, and that this will shift investors’ attention to focus on fundamentals and to look more favorably on smaller companies, value stocks and cyclical sectors.

Analysts agree volatility could lead to vast opportunities for liquid alternative strategies, and full equity market valuations could make private market investing more attractive. In fixed income markets, Federal Reserve and European Central Bank rate convergence may make U.S. bonds more attractive and hedging U.S. dollar risk less costly.