401(k) millionaires jumped 43% in the past year — here’s how long it took them to reach $1 million
The number of 401(k) millionaires jumped 43% from a year ago, boosted by market gains and consistent contributions. But these millionaire success stories lasted an average of 26 years, according to Fidelity Investments.
The first quarter had 485,000 millionaires created by 401(k). That’s a 15% increase from last quarter, when there were 422,000, and a 43% increase from 340,000 a year ago, Fidelity said.
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Of course, these millionaires didn’t become rich overnight. Rather, 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 average first quarter balance for 401(k) accounts reached $125,900, up 16% from the first quarter of the previous year. The median 401(k) balance was $28,900. For 403(b) accounts, retirement accounts for government and nonprofit workers, the average balance was $113,000, up 15% from a year ago.
Meanwhile, the average IRA balance reached $127,745, up 13% 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 growing, providing strong evidence that retirement savers are staying invested and continuing to make regular contributions – while seeing the resulting financial benefits,” said Sharon Brovelli, president of workplace investing at Fidelity.
The S&P 500 SPX index rose 10.6% in the first quarter.
Although retirement account earnings have marked an improvement, average account balances are still well below what Americans believe they need to retire. Adults in the United States estimate they will need $1.46 million to retire comfortably, according to Northwestern Mutual’s 2024 Planning and Progress Study.
Read: How much will you need to retire? America’s “magic number” is $1.46 million.
The total average 401(k) savings rate hit a record high of 14.2% in the first quarter, driven by employee and employer contributions. This savings rate is the closest ever to Fidelity’s suggested retirement savings rate of 15%, the company said.
The report also reflects the benefits of continued savings. People who had been saving for 15 years saw their account balances increase by 7%, Fidelity said. For the first time, the 15-year rolling balance for Gen X participants of $543,400 exceeded the 15-year rolling balance for baby boomers of $543,200, Fidelity said. Generation X includes people born between 1965 and 1980, while baby boomers are those born between 1946 and 1964.
Even with a robust savings rate, Fidelity noted that people continued to borrow from their 401(k) accounts. A total of 17.8% of workers received such a loan in the first quarter, equal to the rate seen in the fourth quarter, but higher than the rate of 16.7% seen a year ago, Fidelity said .
Meanwhile, although only 30% of small businesses offer a retirement savings plan, Fidelity found that small business workers who had access to a retirement plan had higher than average 401 account balances ( k).
Small business retirement plans had an average balance of $152,000 with an average contribution rate of 8%, which exceeded 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 the heart of America’s communities, and it’s encouraging to see that when small business employees have the opportunity to save, they use it,” said Roger Stiles, president of Fidelity Wealth. “Providing small businesses with a variety of options to help meet their retirement needs is an important way to close existing gaps in retirement coverage and encourage more Americans to save for retirement.”
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