The universe of 401(k) accounts with balances of $1 million or more at Fidelity Investments rose to a record 485,000 in the first quarter, according to the company.
With stocks surging, the number of retirement account millionaires jumped 15% from the prior quarter and 43% since March 2023. Average retirement account balances, meanwhile, hit their highest level since the end of 2021, rising to $125,900 for 401(k)s and $127,745 for IRAs.
Despite the gains, ensuring a comfortable retirement remains a big challenge for many people in the US. Inflation has made saving for retirement even more of a struggle, and close to 40% of all workers aren’t even in a workplace retirement program, according to 2023 Bureau of Labor Statistics data. Some 40% of retirees, meanwhile, rely entirely on Social Security income.
It’s worth noting that average balances tell a skewed story, since large account balances boost the averages. The median balance for 401(k)s at Fidelity is $28,900, and $15,000 for IRAs.
Millionaire retirement accounts remain a rarity, making up about 2% of the roughly 24 million defined contribution plan accounts at Fidelity. These accounts holders, not surprisingly, tend to be older. Fidelity’s 401(k) millionaires had an average tenure of 26 years in their workplace retirement savings plans, and an average contribution rate of 17%.
And there was another positive sign for future growth in account balances: Combined 401(k) contributions from employees and employers who offer a company match rose to 14.2% in the first quarter. That close to the 15% rate that Fidelity and many financial services firms suggest as a savings target.
This article was provided by Bloomberg News.