401(k) Balances Hit a Record High … But What Happens When the Market Turns?

401(k) Balances Hit a Record High…But What Happens When the Market Turns?

 

Average 401(k) balances reached a record $155,800 in the second quarter of 2026, according to Fidelity Investments. That represented a 10% increase from the previous quarter, a 13% increase from the second quarter of 2025 and the strongest quarterly growth since late 2020.

That is encouraging news for retirement savers, but the number deserves a closer look.

The record did not result from market performance alone. It reflected a powerful combination of a strong stock market rebound and disciplined long-term saving. It also arrived immediately after a volatile first quarter, reminding investors how quickly account values tied to public markets can move in either direction.

For people approaching retirement or preparing to leave an employer, this may be an appropriate time to look beyond the headline balance and ask a more important question:

Is your retirement portfolio positioned only for the market conditions of today, or is it diversified for the uncertainty of tomorrow?

What Drove 401(k) Balances to a Record High?

Fidelity’s analysis covered more than 55 million IRA, 401(k) and 403(b) accounts. Several factors contributed to the second-quarter milestone:

• Strong market performance: A broad stock market rebound helped reverse declines experienced earlier in the year.
• Record savings rates: The average total 401(k) savings rate remained at 14.4%, including an average employee contribution of 9.6% and an average employer contribution of 4.8%.
• Employer matching contributions: More than eight in ten participants—81.2%—contributed enough to receive their employer’s full match.
• Higher employee contributions: 12.1% of 401(k) participants increased their contribution rate during the quarter.
• Long-term investing behavior: Many participants remained invested rather than reacting to short-term market declines.

These behaviors matter. Consistent contributions, employer matches and a long-term outlook can be powerful components of retirement preparation.

However, an average is not a promise, and a record balance is not a permanent floor.

A Rising Balance Can Still Be Exposed to Market Volatility

Many workplace retirement plans hold portfolios made primarily of publicly traded stocks, bonds, mutual funds and target-date funds. When those markets rise, retirement balances may rise with them. When markets fall, the same accounts can lose value quickly—even if the account owner has made no changes.

The first half of 2026 demonstrated both sides of that relationship: market fluctuations early in the year were followed by a strong second-quarter rebound. Investors who checked their accounts at different points could have seen substantially different balances.

Volatility is not necessarily a reason to abandon the stock market. Publicly traded assets can provide liquidity, transparency and long-term growth potential. The lesson is that a high account value may depend partly on market pricing that can change from one trading day to the next.

For someone who has decades before retirement, short-term market movement may be less significant. For someone near retirement, preparing to take distributions or leaving an employer, the timing of a major decline can have a greater impact.

The Appeal of Assets You Can See and Touch

Some retirement savers want part of their wealth connected to assets outside Wall Street—assets they can understand, evaluate or, in some cases, physically see.

A self-directed IRA may permit investments such as:

• Residential or commercial real estate
• Undeveloped land
• Promissory notes and private lending
• Private companies and private placements
• Precious metals that meet applicable requirements
• Tax liens
• Certain cryptocurrency investments
• Other alternative assets permitted under the Internal Revenue Code

These assets may behave differently from publicly traded stocks and bonds. A rental property, for example, does not receive a new publicly quoted price every second. A properly documented promissory note may generate payments according to its terms rather than daily market sentiment. Physical precious metals do not depend on the continued existence of a brokerage app or a single public company.

That can make alternative assets feel more understandable or durable during periods of market uncertainty. They may also offer additional diversification, potential income or exposure to opportunities the investor already knows well.

But tangible does not mean risk-free, and alternative assets do not automatically provide stability.

Real estate can decline in value, remain vacant or require expensive repairs. Borrowers can default on notes. Private companies can fail. Precious metals can fluctuate in price. Cryptocurrency can be extremely volatile. Many alternative assets are difficult to sell quickly and may require independent valuations.

Unlike the daily movement of a stock price, some alternative-asset risks may remain hidden until a property is sold, a borrower misses a payment or an investor requests liquidity. Stability should therefore be evaluated based on the asset’s fundamentals—not simply because the asset is physical or privately held.

Alternative Assets Versus the Stock Market

This does not have to be an all-or-nothing decision. A self-directed IRA can be part of a diversified retirement strategy rather than a complete replacement for traditional assets.

Consideration	Publicly Traded Assets	Alternative Assets
Pricing	Frequently priced during market hours	May require periodic or independent valuation
Liquidity	Often easier to buy or sell	May have long holding periods or limited buyers
Market volatility	Account values may change daily	Values may appear less volatile but can still decline
Information	Public disclosures may be widely available	Information may be limited or unaudited
Investor involvement	Can be relatively passive	Often requires more due diligence and oversight
Diversification	Broad funds can hold many securities	May diversify beyond stocks and bonds but can create concentration risk
Potential risks	Market loss, inflation, interest-rate and company risk	Illiquidity, valuation, fraud, operational and asset-specific risks

The best mix depends on the investor’s goals, knowledge, time horizon, liquidity needs, risk tolerance and overall financial circumstances.

Leaving an Employer Creates a Decision Point

When you leave a job, you generally have several choices for your former employer’s 401(k):

1. Leave the funds in the former employer’s plan, if permitted.
2. Roll the funds into a new employer’s qualified plan, if the new plan accepts rollovers.
3. Roll the funds into an IRA.
4. Take a taxable distribution.

Cashing out may generate income taxes and, depending on the circumstances, an additional early-distribution tax. A properly completed direct rollover can generally move eligible retirement funds without current taxation. Always confirm the tax treatment before initiating a rollover, particularly when an account includes Roth and pretax money, employer stock, after-tax contributions, an outstanding plan loan or a required minimum distribution.

Could a Self-Directed IRA Be the Right Rollover Choice?

For an investor who wants broader investment choices, a rollover to a self-directed IRA may be worth considering. It can allow eligible retirement funds to remain in a tax-advantaged account while expanding the available investment menu beyond the choices offered by many workplace plans.

Potential advantages include:

• Greater control over investment selection
• Access to certain alternative assets
• The ability to consolidate eligible retirement accounts
• Diversification beyond public securities
• The opportunity to invest in an industry or asset class the investor understands

However, an SDIRA should not be described as automatically safer than a 401(k). It transfers more decision-making responsibility to the account owner. The SDIRA custodian administers the account but generally does not evaluate or recommend the investment, verify the promoter’s claims or determine whether an asset is suitable.

The U.S. Securities and Exchange Commission warns that self-directed IRAs can involve limited information, illiquidity, complex tax rules, higher fees and an increased risk of fraud. Investors must independently investigate each investment and understand the rules before directing the custodian to proceed.

Important SDIRA Rules to Understand

An IRA is not simply a personal checking account with tax benefits. The IRA—not the account holder—must own the investment.

Among other requirements:

• Transactions must be for the exclusive benefit of the retirement account.
• The account holder cannot personally use IRA-owned property.
• Certain transactions involving the account holder, spouse, lineal family members and other disqualified persons are prohibited.
• IRA expenses must generally be paid with IRA funds, and income must generally return to the IRA.
• Some investments or structures may generate unrelated business taxable income or unrelated debt-financed income.
• Alternative assets may require annual fair-market valuations and sufficient liquidity for fees, expenses and required distributions.

A prohibited transaction can create severe tax consequences. Investors should consult qualified tax, legal and financial professionals before proceeding.

Do Not Confuse Control With a Guarantee

The appeal of self-direction is control. It is not protection from loss.

Whether the investment is a publicly traded fund, a rental property, a private placement or a promissory note, careful due diligence remains essential. Before investing, ask:

• Who controls the investment and the money?
• How does the investment generate a return?
• What can cause the investment to lose value?
• Is the investment liquid enough for future expenses and distributions?
• How will its fair market value be established?
• Are the promoter and investment properly registered when registration is required?
• Are projected returns supported by verifiable information?
• Does the transaction involve a disqualified person or personal benefit?
• What fees will the IRA and the investment charge?
• What happens if the investment cannot be sold when cash is needed?

Be especially cautious with unsolicited offers, pressure to act quickly and claims of guaranteed or risk-free returns.

The Takeaway

The record $155,800 average 401(k) balance is good news. It shows what disciplined contributions, employer matches, long-term participation and favorable markets can accomplish.

It also illustrates how closely many retirement accounts are tied to public-market performance. The same market forces that can lift balances rapidly can also reduce them.

When leaving an employer, a self-directed IRA may provide greater control and access to alternative assets, including investments that are not priced minute by minute on Wall Street. For the right investor, that flexibility may support a broader diversification strategy.

But the safest choice is not defined by the account label. It is the choice made after comparing fees, protections, liquidity, investment options, tax consequences and risks—and after conducting careful due diligence on every asset.

uDirect IRA Services provides self-directed IRA administration and education. We do not sell investments, recommend assets or provide investment, tax or legal advice. Investors choose their own investments and should consult the appropriate professionals before making financial decisions.

Ready to explore whether a self-directed IRA fits your retirement strategy? Contact uDirect IRA Services at (866) 447-6598 or Info@uDirectIRA.com.

Frequently Asked Questions

 

Why did average 401(k) balances rise so sharply in the second quarter of 2026?

Fidelity attributed the record balances to a strong market rebound combined with continued saving. The average total 401(k) savings rate remained at a record 14.4%, 81.2% of participants contributed enough to receive the full employer match and 12.1% increased their contribution rate.

Are record 401(k) balances guaranteed to remain at these levels?

No. Retirement accounts invested in stocks, bonds and funds will fluctuate with market conditions. A record average represents a point in time and does not guarantee future performance.

Are alternative assets safer than stocks?

Not necessarily. Alternative assets may respond differently to public-market volatility, but they have their own risks, including illiquidity, valuation uncertainty, operational problems, fraud and concentration. Tangible assets can also decline in value.

Can I roll my former employer’s 401(k) into a self-directed IRA?

Many eligible 401(k) balances can be rolled into an IRA after separation from employment. The correct process and tax treatment depend on the plan and the types of funds in the account. A direct rollover is commonly used to avoid having the distribution paid to the participant, but investors should confirm eligibility and instructions with both plan administrators and qualified tax professionals.

Does an SDIRA custodian approve or endorse investments?

No. A self-directed IRA custodian administers the account and follows the account holder’s investment directions, subject to its policies. The investor is responsible for evaluating the investment, promoter, risks and compliance considerations.

Can I use or personally benefit from an asset owned by my IRA?

Generally, no. Personal use or benefit involving the account holder or another disqualified person may constitute a prohibited transaction. Obtain qualified guidance before entering into any transaction involving the account holder, family members or related businesses.

Sources

• Fidelity Investments Q2 2026 Retirement Analysis
• Investor.gov Switching Jobs
• IRS Rollovers of Retirement Plan and IRA Distributions
• Investor.gov Self-Directed IRAs and the Risk of Fraud

This article is for educational purposes only and is not investment, tax or legal advice. All investments involve risk, including the possible loss of principal. Past performance does not guarantee future results.

Contact uDirect IRA Services

Want to learn more about self-directed IRAs and retirement investing beyond Wall Street?

Call uDirect IRA Services at (866) 447-6598
Email info@uDirectIRA.com
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