By Dan Kadlec
April 29, 2016

For anyone saving for retirement in a 401(k) or IRA, this past quarter delivered an important lesson in the value of shutting out daily market news and staying the course.

If you’ll remember, the year got off to a rough start, with the stock market dropping 10%. But by mid-February stocks had rebounded, and since then the market has made back all the ground it lost early in the year. Anyone who held tight through the volatility or, even better, kept contributing to their 401(k) on a regular basis finished the quarter with gains.

Not everyone held on, of course, and some investors undoubtedly sold stocks at temporarily depressed prices. As a result, the average retirement plan balance fell modestly. At the end of March, the typical 401(k) held $87,300, according to new data from Fidelity, which is down slightly from $87,900 at year-end and off 4.9% from $91,800 a year earlier. IRAs tell a similar story—the average balance stood at $89,300, vs $90,100 at year-end and $94,100 a year earlier.

But 401(k) savers who have contributed continuously for least 10 years enjoyed far better results, probably reflecting the greater calm that comes from experience. In short, they have seen this kind of volatility before and are more comfortable riding it out for the long term. It’s a state of mind that younger investors would benefit from as well. Among these seasoned savers, the average 401(k) balance rose 2% to $240,700 over the past 12 months.

The numbers of savers with both a 401(k) plan and an IRA jumped 7% from a year ago. This probably reflects larger numbers of baby boomers hitting retirement age and rolling over some of their assets into an IRA for greater flexibility. The average combined balance for those with both types of accounts fell 2% to $260,900, Fidelity found.

Financial planners generally advise saving 12% to 15% of earnings, and the typical 401(k) plan saver is measuring up well, Fidelity reports. Counting employee and employer contributions from a match or profit sharing, the savings rate of plan participants hit a record 12.7% in the first quarter.

Calculator: Becoming a millionaire

Saving does not have to be difficult. Start by contributing enough to capture the full company match and then sign up to automatically escalate savings by 1 percentage point a year until you have hit 15%. To keep things simple, funnel all your savings into a target-date mutual fund for age-appropriate asset allocation and diversification.

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