Stock market growth has boosted 401(k) plan balances, with the number of accounts over $1 million hitting an all-time high.
Fidelity reported that there were 485,000 accounts with seven-figure balances at the end of the first quarter, up 15% from the 422,000 401(k) millionaires at the end of 2023. The number was 340,000 a year ago, the company said.
While very few Americans have reached the $1 million milestone in their 401(k) plans, most who have any money in retirement accounts are benefiting from rising stock prices: The S&P 500 index rose more than 10% in the first quarter and is up 26% over the past 12 months.
401(k) balances are growing
According to Fidelity, the average 401(k) plan balance in the first quarter was $125,900, up 16% from the average of $108,200 in the same period last year.
“Record contribution volumes combined with favorable market conditions drove average account balances to their highest level since the fourth quarter of 2021,” the company said in a statement.
Higher account balances reflect the fruits of consistent savings, and the data shows that becoming a 401(k) millionaire takes determination and perseverance, and that account holders generally do a good job saving for retirement.
- According to Fidelity, millionaires have been saving in their 401(k)s for an average of 26 years.
- The average 401(k) millionaire contribution rate, including employee and employer contributions, is 17%.
- The average savings rate for 401(k) account holders was 14.2% in the first quarter, the highest on record and up from 13.5% in 2019.
According to data from Fidelity, balances in 401(k)s, as well as individual retirement accounts (IRAs) and 403(b) accounts, have increased significantly over the past year.
- The average IRA balance was $127,745, an increase of 13 percent.
- The average balance in 403(b) plans increased 16% to $113,000. 403(b) plans are similar to 401(k) plans but are available to employees of public and nonprofit organizations.
While rising retirement account balances are a positive development, many Americans are still lagging behind in preparing for the future, considering that a recent Northwestern Mutual survey found that American adults say they need about $1.5 million to retire comfortably, including millionaires with 401(k) plans.
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