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401(k) Millionaires Grew 43% Last Year—See How Long It Took to Get to $1 Million
The average total 401(k) savings rate hit a record 14.2%, Fidelity said. -Getty Images/iStockphoto
The number of 401(k) millionaires increased 43% from the previous year, driven by market gains and steady contributions. But these million-dollar success stories took an average of 26 years to build, according to Fidelity Investments.
The first quarter had 485,000 millionaires created by 401(k). That represented a 15% increase from the last quarter, when there were 422,000, and a 43% increase from the previous year’s count of 340,000, Fidelity said.
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Of course, these millionaires didn’t get rich overnight. On the contrary, these account holders have been in their plans for an average of 26 years and have an average contribution rate of 17%, Fidelity said.
The first quarter average balance for 401(k) accounts reached $125,900, a 16% increase from the previous year’s first quarter. The average 401(k) balance was $28,900. For 403(b) accounts, the retirement accounts for public and nonprofit employees, the average balance was $113,000, a 15% increase from the previous year.
Meanwhile, the average IRA balance reached $127,745, a 13% increase from the previous year, Fidelity said. IRA accounts tend to have slightly higher balances than 401(k)s because people often consolidate multiple 401(k)s into one IRA, Fidelity said.
Fidelity said the analysis reflected more than 45 million IRA, 401(k) and 403(b) accounts.
“We are encouraged to see account balances increase, providing solid proof that retirement savers are continuing to invest and continue to make steady contributions – while seeing the financial benefits as a result,” said Sharon Brovelli, president of Workplace Investments from Fidelity.
The S&P 500 SPX index rose 10.6% in the first quarter.
While retirement account earnings have seen an improvement, average account balances still fall far short of what Americans feel they need to retire. In the US, adults believe they will need $1.46 million to retire comfortably, according to Northwestern Mutual’s 2024 Planning and Progress Study.
To read: How much will you need to retire? America’s “magic number” rises to $1.46 million.
The story continues
The average total 401(k) savings rate reached a record high of 14.2% in the first quarter, driven by employee and employer contributions. This savings rate is the closest it has ever been to Fidelity’s suggested retirement savings rate of 15%, the company said.
The report also reflected the benefit of continued savings. People who had been saving for 15 years saw a 7% increase in their account balances, Fidelity said. For the first time, the 15-year rolling balance for Gen Xers of $543,400 surpassed the 15-year rolling balance for baby boomers of $543,200, Fidelity said. Generation X are those born between 1965 and 1980, while baby boomers are those born between 1946 and 1964.
Even with the robust savings rate, Fidelity noted that people continued to borrow from their 401(k) accounts. A total of 17.8% of workers took out this type of loan in the first quarter, which was the same as the rate seen in the fourth quarter but higher than the 16.7% rate seen a year ago, Fidelity said.
However, although only 30% of small businesses offer a retirement savings plan, Fidelity found that workers at small businesses who had access to a retirement plan had higher-than-average 401(k) account balances.
Small business retirement plans had an average balance of $152,000 with an average contribution rate of 8% — which beat the 9.3% deferral rate for a traditional 401(k), Fidelity said. Small business accounts reflected SEPs, simple IRAs, and self-employed 401(k)s.
“Small businesses are at the heart of American communities, and it’s encouraging to see that when small business employees have the opportunity to save, they take advantage of it,” said Roger Stiles, president of Fidelity Wealth. “Offering small businesses a variety of options to help meet their retirement needs is an important way to close any existing gaps in retirement coverage and get more Americans saving for retirement.”