 millionaires are on the rise, with retirement balances hitting a near two-year high. Discover the key factors driving this surge in wealth and how you can maximize your own retirement savings.){kind=link}
The latest quarter saw a positive trend for individuals saving for retirement. Retirement account balances surged to their highest levels in two years due to improved market conditions and consistent savings rates, as reported by Fidelity Investments. The average balance in a 401(k) account reached $118,600 in the fourth quarter, representing a 14% increase from the previous year. Additionally, the average IRA balance was $116,600, marking a 12% increase, while the average 403(b) balance was $106,100, showing a 14% rise from the prior year.
Sharon Brovelli, who serves as the president of workplace investing at Fidelity Investments, expressed optimism about the past year for retirement savers. Despite the market fluctuations and economic events experienced in 2023, many individuals maintained a long-term perspective and remained committed to their savings goals. This dedication bodes well for their financial security in the future.
A noteworthy statistic highlighted by Fidelity is that Gen X workers who consistently contributed to a 401(k) for 15 years had an average balance surpassing $500,000 ($501,000) by the end of 2023. This achievement emphasizes the benefits of sustained, long-term savings practices. Moreover, there was a significant increase in the number of 401(k) millionaires in the fourth quarter. The count of individuals with over $1 million in their 401(k) rose to 422,000, marking a 20% rise from the third quarter of 2023.
Michael Shamrell, the vice president of thought leadership at Fidelity’s workplace investing division, noted that 401(k) millionaires exemplify resilience and perseverance in their investment strategies. These individuals, with an average tenure of 26 years, have weathered various market challenges over time and serve as models for maintaining a consistent approach to investing. The savings rate among millionaire investors stood at 26.6%, inclusive of personal contributions as well as those from their employers.
The total 401(k) savings rate remained steady at 13.9% in 2023, encompassing both employee and employer contributions. This figure was consistent with the rates in the previous quarters and showed a slight increase from the same period in the preceding year. Furthermore, Fidelity reported that 37% of workers raised their retirement-savings contribution rate in 2023.
With the Secure 2.0 Act extending required minimum distributions to age 73, many pre-retirees and retirees under 70 maintained a savings-oriented mindset without tapping into their 401(k) accounts. Only 20% of retirees between the ages of 70 and 72 made withdrawals, while 94% of retirees aged 73 and older withdrew from their 401(k) plans in 2023.
In a noteworthy trend, the number of Roth IRA accounts for Gen Z investors, born between 1997 and 2012, surged by 50% in the fourth quarter of 2023. This shift indicates a growing interest in retirement savings among younger generations.