Many Americans have watched their retirement plans stall over the past year. Some stopped contributing altogether. Others dipped into their 401(k)s to cover rent, medical bills, or credit card debt. A few made decisions during a moment of panic that they’re still trying to reverse.
According to the Q4 2025 Quarterly Market Perceptions Study from the Allianz Center for the Future of Retirement, more than half of Americans (51%) have either stopped or reduced their retirement savings in the past six months due to economic pressure.
Fidelity Investments, which administers retirement accounts for tens of millions of workers, recently published a detailed recovery framework outlining five steps designed to help people at any age rebuild after a financial setback.
The guidance is grounded in institutional research and built around moves that are available to most working Americans right now.
Step 1: Rebuild your financial foundation
Fidelity advises anyone recovering from a setback to create a household budget, secure basic insurance coverage through an employer if possible, and begin building an emergency fund of at least $1,000, working up toward three to six months of essential expenses.
That emergency cushion is the buffer that prevents a temporary financial disruption from becoming a retirement-account withdrawal. If you don’t have one, building it should take priority alongside debt reduction.
Fidelity recommends tackling high-interest debt before ramping up savings
High-interest debt, particularly credit card balances, should be paid down before aggressively funding long-term savings accounts.
If you’re carrying a balance at 22% APR while your retirement investments return 8% annually, the math favors paying down the card first.
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Fidelity also flags health savings accounts (HSAs) and flexible spending accounts (FSAs) as underused tools. HSAs offer a triple tax advantage: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free.
For 2026, HSA contribution limits are $4,300 for individuals and $8,550 for families, according to the IRS. Funds roll over year to year and can be invested for long-term growth, making HSAs a powerful supplemental retirement vehicle.
Step 2: Restart your retirement contributions
Fidelity’s second step targets the behavior that does the most damage when left unaddressed: paused contributions. Even restarting at 1% of pay creates meaningful compounding over time.
The firm’s core recommendation is to contribute at least enough to capture any available employer match, which effectively provides a guaranteed return on your money before the market even enters the equation.
Contribution rates are improving, but most workers are still well short
According to Vanguard’s How America Saves 2026 preview, the average deferral rate reached a record 7.7% in 2024, and 45% of participants increased their contribution rate during the year.
Average 401(k) balances rose 13% to a record $167,970. But only 14% of participants actually max out their workplace plan contributions. Among workers earning between $75,000 and $100,000, that figure drops to just 2%.
Fidelity recommends gradually increasing contributions until you reach 15% of pre-tax income, including any employer match. That is the savings rate the firm considers generally sufficient to maintain your standard of living in retirement.
If your plan offers auto-escalation, which automatically raises your deferral by 1% annually, enrolling in it is one of the most effective behavioral finance tools available. Data from the Employee Benefit Research Institute shows that auto-escalation features can reduce the national retirement savings shortfall by up to 9%.
Workers without employer plans have expanded IRA options in 2026
If you don’t have access to a 401(k) or 403(b), Fidelity recommends contributing to an IRA and setting up automatic transfers so the process doesn’t depend on willpower alone.
For 2026, the IRS raised the IRA contribution limit to $7,500, with an additional $1,100 in catch-up contributions for savers aged 50 and older, bringing the total to $8,600. The Roth IRA income phase-out range for single filers runs from $153,000 to $168,000 in 2026.
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About 56 million U.S. workers currently lack access to any employer-sponsored retirement plan, according to the National Institute on Retirement Security. For those workers, an IRA with automated deposits may be the single most accessible path to building retirement savings.
Step 3: Repay 401(k) loans and avoid early withdrawals
Step three addresses a growing trend. Hardship withdrawals and 401(k) loans have both increased in recent years as workers use retirement assets to manage current expenses.
Fidelity’s own data shows that 19.4% of plan participants had an outstanding 401(k) loan in 2025, up from 18.9% the prior year. Vanguard’s latest report also shows that hardship withdrawals have been rising alongside record-high average balances.
A $300,000 gap caused by behavior, not markets
Fidelity illustrates the cost with a scenario involving three hypothetical workers, all earning $75,000 and contributing 10% of their salary, who each took a $20,000 loan from their 401(k) at age 40.
The worker who repaid on time and maintained contributions reached roughly $981,000 by age 67. The one who cut contributions in half during repayment finished with about $902,000.
The worker who stopped contributing entirely and took a second loan ended up with approximately $673,000. That $308,000 difference was driven entirely by savings behavior, not by investment selection or market timing.
It is one of the clearest illustrations of how disruptions to contribution discipline compound over decades.
Rules to know if you have an outstanding 401(k) loan
- Loans must generally be repaid within five years, plus interest
- Leaving your employer before repayment typically converts the outstanding balance into a taxable distribution, potentially triggering a 10% early withdrawal penalty
- Continuing to contribute to your plan during the repayment period is critical for minimizing the long-term impact
- Taking multiple loans multiplies the damage, as Fidelity’s scenario demonstrates
Photo by Catherine Delahaye on Getty Images
Step 4: Balance retirement savings with competing financial priorities
Fidelity’s fourth step acknowledges a tension that financial advice often glosses over: most Americans are trying to save for retirement, build an emergency fund, manage debt, and cover rising living costs simultaneously.
The firm recommends a technique called mental accounting, in which you label separate savings goals with specific, personally meaningful names to maintain focus and motivation across multiple objectives.
The national retirement savings picture remains stark
A February 2026 report from the National Institute on Retirement Security found that the median retirement savings for all working Americans is just $955, including non-savers.
Even among workers with positive account balances, the median stands at only $40,000. For workers aged 55 to 64, the group nearest to retirement, the median is roughly $30,000.
These numbers reflect a structural problem, not merely individual failure. Many workers lack access to employer-sponsored plans. Others face trade-offs between retirement contributions and immediate financial obligations, leaving little room for long-term savings.
Fidelity’s practical suggestion here is to use tools like its Goal Booster feature to automate short-term savings targets. Saving $167 per month, for example, builds a $6,000 emergency fund within three years.
Step 5: Assess your full retirement readiness
The fifth step moves from action to evaluation. Fidelity recommends measuring your retirement readiness using four metrics: your annual savings rate, your progress toward age-based savings milestones, your expected income-replacement rate in retirement, and your planned withdrawal rate.
How Fidelity’s age-based savings milestones work
Fidelity’s widely cited benchmarks suggest having one times your annual salary saved by age 30, three times by 40, six times by 50, eight times by 60, and ten times by 67.
These are directional targets, not guarantees. Your actual number will depend on where you plan to live, your healthcare needs, whether you carry a mortgage into retirement, and what Social Security benefits you expect to receive.
The firm targets an income replacement rate of roughly 45% from personal savings and investments, with the remainder covered by Social Security and any pension income. Its recommended sustainable withdrawal rate is approximately 4% per year, consistent with the broader financial planning consensus.
The 2026 contribution limits create real catch-up opportunities
If you are in recovery mode, the 2026 tax year offers meaningful room to accelerate. The IRS raised the 401(k) employee deferral limit to $24,500. Workers aged 50 and older can contribute an additional $8,000 in catch-up contributions, for a total of $32,500.
Workers aged 60 to 63 qualify for the SECURE 2.0 super catch-up of $11,250, allowing a maximum of $35,750 in a single year.
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Combined with the $7,500 IRA limit and the $1,100 IRA catch-up for those 50 and older, a worker in their peak earning years could shelter more than $40,000 across retirement accounts in 2026.
One important caveat under SECURE 2.0: starting in 2026, if you earned more than $150,000 in the prior year, your catch-up contributions to employer plans must be made on a Roth (after-tax) basis.
Pitfalls that can undermine even a disciplined recovery plan
Fidelity’s framework provides a strong starting point, but several common mistakes can derail progress if you’re not aware of them.
- Overcompensating with risk: After a setback, the temptation to chase returns in speculative investments can be strong. Increasing equity exposure beyond what your time horizon and risk tolerance support often compounds the problem rather than solving it.
- Neglecting asset allocation: If your life circumstances, timeline, or goals have changed, your portfolio should reflect that. Fidelity recommends working with a financial professional to rebalance after a major financial disruption.
- Cashing out when changing jobs: Rolling a 401(k) into an IRA or a new employer’s plan preserves tax-deferred growth. Cashing out triggers income taxes plus a 10% penalty for those under 59 and a half, which can erase years of accumulation.
- Relying too heavily on Social Security: Social Security trustees project that beneficiaries could face a roughly 20% benefit cut starting in 2034 if Congress does not address the program’s funding gap. Building personal savings alongside expected Social Security income is essential for a secure retirement.
The savings gap is systemic; your recovery plan should be personal
The Northwestern Mutual 2025 Planning & Progress Study found that Americans believe they need $1.26 million to retire comfortably. More than half (51%) worry about outliving their savings. For Gen X workers approaching retirement, 54% say they do not expect to be financially prepared when the time comes.
No single plan closes a national retirement gap. But the steps that move the needle most; resuming contributions, removing high-interest debt, padding your emergency savings, and taking an honest look at your current position, are within reach for most working Americans. They do not demand financial sophistication. They demand a decision.
If your retirement savings have taken a detour, you are in a large company. The question is not whether you fell behind. It is whether you start moving forward from where you are right now. Fidelity’s five-step playbook provides the roadmap. Following it is up to you.
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