The second quarter of 2022 was a tough one for investors. Stock values dropped across the board but were particularly rough in the tech sector. And so, not surprisingly, IRA balances declined last quarter.
The average IRA balance fell to $110,800 during Q2 of 2022, a 17.9% decrease from a year prior, reports Fidelity. That's the bad news. The good news, though, is that IRAs grew among younger savers. Gen Z IRA participation increased 87% compared to Q2 2021, while millennial participation rates increased 24%.
Should you worry if your IRA took a hit?
If your IRA balance declined during 2022's second quarter, you're no doubt in good company. And you really shouldn't stress about it too much if retirement isn't right around the corner.
In the course of your retirement savings window, which may be decades-long, you're apt to go through periods when your balance takes a dip. But ultimately, if you stick with your investing strategy and avoid taking impulsive steps, like selling off investments when they're down, there's a good chance declines like investors saw last quarter will end up being mere blips in the course of your investing career.
That said, now may be a good time to check up on your IRA and make sure it's well diversified. One benefit IRAs have over 401(k)s is that they allow you to invest in individual stocks. But it's a smart idea to make sure you've chosen stocks across a range of industries.
Many investors jumped on the tech bandwagon over the past few years and saw giant on-screen losses in their IRAs last quarter. So, if you're heavily loaded in a single market sector, whether it's tech or something else, you may want to start branching out.
Keep funding that IRA
It may be discouraging to see a lower IRA balance from time to time. But try not to let that get to you, and definitely don't use temporary losses as a reason to abandon your retirement savings efforts. Maxing out your IRA -- or getting as close as possible -- could be your ticket to the comfortable retirement you deserve, so it's best to keep funding that account, even when market conditions are turbulent.
How to grow your IRA balance
If you're not happy with your IRA balance at present, think about the things you can do to boost it. That could mean cutting back on discretionary spending to free up more cash for retirement savings or getting yourself a side job and using your earnings to save for retirement.
You should also make sure your IRA is invested in an aggressive enough manner to fuel its growth. When you're years away from retirement, stocks are the way to go, whether individually or via broad market index funds. Bonds may seem like a safer bet for your savings but could also lead to weak returns over time. And even though stocks might make for a wilder ride, at the end of the day, they could be your ticket to meeting your retirement goals.