Why there are more 401(k) millionaires in the US than ever before
FILE-In this photo illustration, a man is seen holding money in his hand. (Photo Illustration by Sheldon Cooper/SOPA Images/LightRocket via Getty Images)
The number of 401(k) plan participants with balances of $1 million or more rose to a record high at the end of June, according to new findings published by Fidelity Investments.
There were about 497,000 so-called 401(k) "millionaires" during the second quarter, the data shows. That marks a 2.5% increase from the previous quarter and is the third-straight quarter of retirement savings growth.
Among those accounts, the average balance hit $1,595,200, up from $1,581,000 at the end of March.
THE 'MAGIC NUMBER' TO RETIRE COMFORTABLY HITS NEW ALL-TIME HIGH
"Although increases were modest, retirement savers in the second quarter of 2024 benefited from the continued upswing of the previous quarter, when contribution levels and average account balances reached record highs," Sharon Brovelli, president of workplace investing at Fidelity, said in a statement.
Despite the increase, the typical account balance is still nowhere near the $1.46 million figure that Americans believe they need to retire comfortably.
Fidelity data shows that the average balance in an employer-sponsored retirement contribution plan rose to $127,100, a 1% increase from the start of the year and a 13% jump from the year-ago period. The median account balance was $55,500.
AMERICANS ARE WORRIED ABOUT OUTLIVING THEIR RETIREMENT SAVINGS
On average, Americans are putting about 14.2% of their income toward savings. Retirement experts recommend that at least 15% of your income goes toward savings.
Consumers are grappling with a number of financial headwinds, including steep interest rates and ongoing inflation that has made the cost of just about everything from rent to gasoline to groceries more expensive. The burden is disproportionately borne by low-income Americans, whose already-stretched paychecks are heavily affected by price fluctuations.
While inflation has fallen considerably from a peak of 9.1% notched during June 2022, it remains above the Federal Reserve's 2% goal. And when compared with January 2021, before the inflation crisis began, prices are up 20%.
The uncertain economic landscape has many Americans reconsidering whether retirement is a realistic goal. More than one-quarter of all non-retired investors said they would likely be forced to return to the workforce at some point due to inadequate savings if they were to retire within the next 12 months, and 19% doubt they will ever save up enough money to retire, according to separate survey data from Nationwide.
"Americans believe they will need over $1 million to retire comfortably, a figure that could be discouraging for even the most committed retirement savers," said Rona Guymon, senior vice president of Nationwide annuity distribution.