Looks like the stock market’s end-of-the-year plunge didn’t prevent people from continuing to set aside money for their 401(k) plans during the first quarter of 2019.
According to Fidelity Investments’ latest quarterly analysis of retirement savings trends released May 9, the average 401k balance rose to $103,700 during the first three months of this year, an 8% increase from $95,600 in Q4 2018. The year-over-year average balance is up roughly 1% from $102,900 in Q1 2018.
The report also found the average worker set aside a record $2,370 during the first quarter, up 15% from a year earlier. And employers increased their own “company match” contributions to a record average of $1,780 in Q1, a 6% increase from one year earlier.
The average 401(k) employer contribution rate, in terms of percentage of salary, reached 4.7% in Q1, which was also a record high and boosted the average total savings rate (employee contributions + company match) to an all-time high of 13.5% in the first quarter.
“One of the most important aspects of a retirement savings strategy is making sure you’re contributing enough to reach your goals,” said Kevin Barry, president of Workplace Investing at Fidelity Investments. “While the growth of account balances is due to a combination of market performance and savings, both are critical to reaching long term retirement savings goals.”
Barry noted that Fidelity recommends workers save at least 15% of their income for retirement. “It’s encouraging to see that, on average, people are saving more for retirement,” Barry said.
10-year analysis shows more balanced allocation
In light of the 10-year anniversary of the stock market reaching all-time lows during the financial downturn, Fidelity examined the accounts of 1.64 million individuals who have had the same 401(k) account since Q1 2009. In addition to comparing current 401k account balances by generation with their average balance 10 years ago, the 10-year analysis also highlighted how the average asset allocation within 401(k) accounts has gradually shifted to become more diversified, which can be partially attributed to the increasing use of target date funds among 401k savers.
As of Q1 2019, 52% of individuals had all of their 401(k) savings in a target date fund, compared with just 16% in Q1 2009.
In addition, a much lower percentage of individuals had all of their 401(k) savings in stocks—only 7% of individuals had an all-stock 401k, compared with 15% who had an all-stock 401k allocation in Q1 2009.
For more information on Fidelity’s Q1 2019 analysis, click here to access Fidelity’s “Building Futures” overview, which provides additional details and insight on retirement trends and data.
More highlights from the analysis
- The number of 401(k) and IRA millionaires increased. The number of people with $1 million or more in their 401k increased to 180,000, up from 133,800 at the end of Q4, while the number of IRA millionaires increased to 168,100, up from 138,800 last quarter.
- Contributions to 403(b)/tax exempt retirement accounts increased to record levels, with the average employee contribution amount reaching $1,700 in Q1, while the average employer contribution increased to $1,430.
- The average IRA balance increased to $107,100, a 9% increase from last quarter and 2% higher than the $105,100 balance one year ago. The average 403(b) account balance increased to $85,800, also a 9% increase from last quarter and up 2% from Q1 2018.
- Combined average balances for individuals saving in both an IRA and a workplace savings plan increased to more than $300,000. The combined average balances for savers with both a workplace retirement plan, such as a 401(k) or 403(b), and an IRA reached $307,600, a record high and an increase of 9% from the combined average balances of $281,000 at the end of 2018.
- The number of 403(b) accounts reached record levels. The number of individuals with a 403(b) account at Fidelity increased to 6.1 million at the end of Q1, an increase of nearly half a million (456,000) accounts over the past year and a 43% increase over the past five years.