It’s a trend we absolutely want to continue—the number of 401k millionaires has reached another record high.
As the Dow crossed another milestone threshold, so did retirement plan savers, with CNBC reporting that the number of 401k plans at Fidelity Investments with a balance of $1 million or more jumped to a 200,000 in the third quarter of 2019.
However, Fidelity, the nation’s largest recordkeeper, also found that as the number 401k millionaires grew, average 401k balances decreased slightly in the quarter. The average 401k balance dipped to $105,200 but was less than a 1% decrease from $106,000 in Q2 2019.
The year-over-year average balance was down just over 1% from a record high balance of $106,500 in Q3 2018.
The average IRA balance dropped slightly to $110,200, less than half a percentage point from last quarter and less than 1% lower than the $111,000 balance one year ago.
The average 403b/tax-exempt account balance dipped to $88,000, less than a 1% decrease from last quarter but up slightly from Q3 2018.
Long-term saver success
Long-term savers saw balances increased to record levels in Q3. Among participants who have been in their 401k plan for 10 years straight, the average balance reached a record $306,500, topping the previous high of $306,000 from Q3 2018.
Among workers saving in a 403(b)/tax exempt account, the 10-year continuous balance reached $179,000, more than four times the average balance for this group in Q3 2009.
Target-date tactics
An increasing number of individuals are keeping all of their retirement savings in a target-date fund, which can provide a diversified investment mix that can reduce the overall level of risk in their retirement account.
Target date funds are often used as a default investment option for employers who automatically enroll employees in their workplace savings plan.
As of Q3, 53% of 401k savers kept all of their savings in a target-date fund, while 66% of workers saving in a 403b/tax-exempt account kept all of their savings in a target-date fund.
Staying the course
The majority of 401k savers did not make changes within their 401k investments. Despite market swings in Q3, only 5.1% of 401k savers made a change to the investments within their 401k, which is up slightly from Q2 but down from 5.2 percent in Q3 2018. Almost all (82.7%) of those savers who made some sort of change to their investments only made one.
Roth
The number of workers contributing to a Roth 401k increased to 1.02 million in Q3, a nearly ten-fold increase from the 109,000 workers who contributed to a Roth 401k in Q3 2009. Nearly half (485,000) of the workers contributing to a Roth 401k are Millennials.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
