Number of 401(k) ‘millionaires’ jumped 41% last year, says Fidelity – CNN

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CNN
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More new 401(k) “millionaires” were created last year, but the overall number remains small, according to data released Tuesday.

Thanks to the strong performance of stocks and bonds in 2023, as well as stable savings rates and employer-provided matching contributions, 401(k) investors ended 2023 in a very positive light.

That’s according to new fourth-quarter data from Fidelity Investments, one of the largest providers of workplace retirement plans. 23 million 401(k) participants.

The average 401(k) balance rose to $118,600 at the end of the fourth quarter, an increase of 14% for the year.

Fidelity research has found that among Gen .

Fidelity also reported that the number of 401(k) accounts with balances of $1 million or more increased 20% in the fourth quarter to 422,000 accounts. For the year, it increased by 41%. The average account balance for this group in the fourth quarter was $1,551,300.

However, market performance is not the only factor contributing to balance growth. Actual savings habits played a big role. According to Fidelity, 27% of plan participants actively increased their contribution rates over the last year. Also, his 78% of 401(k) savers were contributing at a high enough rate to receive their full employer matching contributions.

The average savings rate, which combines employee and employer contributions, was 13.9% last year, up slightly from 13.7% the year before.

“Last year ended on a strong note for retirement savers,” said Sharon Brovelli, president of Workplace Investing at Fidelity Investments. “While 2023 has seen some highs and some lows in terms of market stability and economic conditions, the encouraging thing is that many retirement savers are taking a long-term view. and stayed on track to get through all of this. It’s the type of commitment that can lead to a secure financial future.”

However, a large portion of the U.S. workforce is not benefiting from the good news of 401(k) plans. The Bureau of Labor Statistics reported last year that 73% of civilian workers had access to employer-sponsored retirement plans, but only 56% participated.