Retirement savers enjoyed a particularly strong second quarter, according to Boston-based Fidelity Investments.
In a second-quarter analysis of retirement accounts released on Thursday, Fidelity found that the average 401(k) balance increased to $104,000 in the second quarter from $97,700 in the second quarter of 2017 for a 6 percent year-over-year increase. The second-quarter number is just shy of the all-time high balance of $104,300 posted in the fourth quarter of 2017.
Fidelity also found a record number of 401(k) millionaires in the second quarter, noting 168,000 account holders with $1 million or more, an increase of 49,000 from the second quarter of 2017.
While the bull market has contributed to the growth of 401(k) balances, automated account features are also playing a role, said Kevin Barry, president of workplace investing at Fidelity Investments, in released comments.
"As retirement savings plans continue to evolve to meet the changing needs of today's workforce, it's clear the one feature that has really had a positive impact on the retirement landscape over the past decade is auto-enrollment," concluded Barry. "Auto-enrollment positioned an entire generation of workers to build their retirement nest eggs."
Employees who are automatically enrolled tend to save more, according to Fidelity. Since 2008, the average savings rate for workers automatically enrolled has increased from 4 percent to 6.7 percent, and nearly two-thirds of auto-enrolled employees increased their savings rate in the same period. For plans with automatic enrollment, the employee participation rate was 87 percent in the second quarter of 2018, compared with a participation rate of 52 percent among plans without auto-enrollment.
In the second quarter, the average default savings rate in auto-enrollment plans rose to 3.9 percent after five straight quarters at 3.8 percent. Today, almost one in five employers uses a default savings rate of 6 percent or higher, which Fidelity says is more than double the percentage of a decade ago.
At the end of the second quarter, one-third of Fidelity’s 22,600 401(k) plans had an auto-enrollment feature, more than double the percentage that auto-enrolled workers in 2008.
The average defined contribution plan contribution rate rose to 13.1 percent in the second quarter of 2018, up from 12.5 percent in 2008 and 12.6 percent in 2016.
The average IRA account balance increased to $106,900 from $100,200 in the second quarter of 2017, a 7 percent year-over-year increase, while the average 403(b) balance increased to $83,400 from $78,900 in the second quarter of 2017, a 5 percent increase.