The number of private sector workers in the U.S. with access to 401(k) plans surged 6.35% in 2023 to reach more than 71.5 million individuals, or nearly 6 in 10 U.S. workers for the first time.
This according to New York-based Capitalize, a technology company that helps consumers digitally locate and roll over their old 401(k) accounts. Today the company released its new 401(k) Statistics Tracker, which also shows last year was the second year in a row of gains as 4.3 million employees gained new access to 401(k) accounts.
The Capitalize 401(k) Statistics Tracker also shows Americans with 401(k) plans contributed an average of $5,191 to their accounts in 2023, up slightly from 2022 and marking the second consecutive year with the average savings surpassing the $5,000 threshold. This amount equates to 7.1% of the average participant’s pre-tax income for the year, or approximately $1 out of every $14 they earned, up from 6.7% in 2019.
Balances grow in 2023
Americans’ average 401(k) account holdings increased by 7.98% in 2023, ending the year with a balance of $90,101, compared with the previous year’s average ending balance of $83,445. The median 401(k) account balance in 2023, indicative of the typical American 401(k) account, was $18,273 by the end of 2023, a 7.55% increase over 2022. The significant difference between these two account balances highlights the impact that long-standing, higher earning 401(k) participants have on overall average account balances.
The research is different from other recent studies in that it is not based on a single institution sample, which can be skewed toward higher-earners and not represent the wider U.S. 401(k) account-holder profile.
“Capitalize’s new 401(k) Statistics Tracker underscores the growing popularity of 401(k)s as a retirement saving strategy and the importance of consistent contributions over the long-term,” said Gaurav Sharma, CEO of Capitalize. “Nearly six in 10 American workers now have access to 401(k) accounts, though there remains significant variance in balances, with an almost 400% difference between average and median balances. The SECURE Act and other initiatives continue to drive growth in 401(k)s and we’re excited to help provide a centralized hub for important data on 401(k)s and the retirement savings market.”
Savers benefit from matches
The $5,191 average contribution in 2023 was a modest increase of $77 from the $5,114 saved on average in 2022, but a 29% increase compared to 2019’s average contribution of $4,014. The median contribution to 401(k) accounts was $4,753, 8.5% lower than the average annual contribution.
When employer contributions are factored in, the average contribution percentage increases by 3.3 percentage points to 10.4%. This means employers contributed an additional $2,384 on top of the employees’ $5,191, bringing the total average contribution to $7,575.
Impact of tenure and age
The study estimates the stark demographic differences regarding 401(k) account tenure and account holder age.
As part of the research, Capitalize estimated the average balances for specific groups within the account population, according to account tenure and account holder age. For example, younger 401(k) participants in their 20s, with up to two years of tenure, have an average balance of $5,863. This compares to a 50-year-old participant with more than 30 years of tenure who has an average balance of $373,789.
“Savers in their twenties tend to move jobs more frequently, have shorter-tenured accounts, and save differently from individuals in their fifties,” Sharma added. Our research shows that there are 29.2 million left behind or forgotten 401(k) accounts, the number of which increased by more than 20% since May 2021. The majority of these forgotten accounts belong to younger workers, impacting their ability to save for retirement.”
The 401(k) Statistics Tracker found there was an estimated $1.65 trillion in assets in left-behind or forgotten 401(k) accounts in 2023.
SEE ALSO:
• 401(k) Millionaire Ranks Spike 20%
• 401(k) Balances (and Millionaires) Dip Slightly in Q3: Fidelity
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
