Welcome to the “401k Millionaires Club,” Fidelity Investments can say to another 16,000 Americans.
The number of 401k millionaires reached record levels in the second quarter of 2019 according to just-released figures from Fidelity. Plan participants with $1 million or more in their 401k increased to a record 196,000 as of June 30, up from 180,000 at the end of Q1 and up 17% from 168,000 at the end of 2018.
Fidelity Investments released its quarterly analysis of retirement savings trends on Aug. 21, including account balances, contributions and savings behaviors, across its more than 30 million retirement accounts. The report has plenty of other good news in addition to the record-breaking number of 401k millionaires. Among the other highlights:
- The average 401k balance at Fidelity continued to increase in the second quarter to $106,000, just shy of the all-time high of $106,500 reached in the third quarter of 2018.
- Among participants who have been in their 401k plan for 10 years straight, the average balance reached $305,900, more than five times the average balance of $59,900 for this group 10 years ago. As of the end of Q2 2019, more than 1.6 million individuals had been in the same 401k plan since Q2 2009.
- Nearly a third (32%) of savers increased their contribution rate in Q2, the highest quarterly percentage ever and nearly three times the 11% of savers that increased their contribution rate in Q2 2009.
- Among Millennials, the percentage of workers that increased their savings rate was 38%, while 34% of women increased their savings rate.
“The record number of workers who increased their 401k contribution rate is a great indication of how focused Americans are getting about saving for retirement,” said Kevin Barry, president of Workplace Investing at Fidelity Investments. “Increasing your contribution rate, even by one percent, can make a big difference in your long-term retirement savings. What may seem like a small amount today can have a significant impact on your account balance in 10 or 20 years.”
Higher savings rates for new employees
Since the passage of the Pension Protection Act in 2006, the percentage of employers that automatically enroll new employees in the company’s 401k has increased to nearly 35%.
And as the number of employers auto enrolling employees has grown, the default contribution rate for auto enrolled employees has also steadily increased—as of the end of Q2, more than one in five employers (20%) defaulted auto enrolled employees at a contribution rate of 6% or higher, more than three times the 6% of employers that defaulted employees at this rate as of Q2 2009.
While a 3% default contribution rate is still the most popular among employers, the percentage of employers defaulting at this rate has dropped to 44%, down from more than 60% 10 years ago.
Average IRA, 403(b) balances also up
The average IRA balance is $110,400 as of the second quarter, also slightly below last year’s high of $111,000, while the number of IRA millionaires increased to 179,700, also a record high and an increase from 168,100 last quarter.
The percentage of IRAs owned by Millennials at the end of Q2 increased by 20% over the same period last year. Among Millennial women, the percentage of IRAs owned at the end of Q2 increased 19% over Q2 2018.
The average 403(b)/tax exempt account balance increased to $88,600, a 3% increase from last quarter and up 6% from Q2 2018.
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