Retirement confidence might not have fully rebounded since 2008, but savings rates are another matter. In a bit of could news about participant behavior, the total savings rate for 401k savers reached a record 12.9 percent in the first quarter of 2017, topping the previous high of 12.8 percent in 2006.
In addition, Fidelity found a record 27 percent of 401k investors increased their individual savings rate in the last 12 months. The rate combines individual contributions plus employer contributions (such as a company match and profit sharing).
Savings rates also increased in IRAs. Fully 17 percent more Fidelity customers contributed to their accounts in the first quarter versus the same period last year. Additionally, there was a 38 percent increase in the amount being contributed.
Calling it “great news for all savers,” the Boston-based investment manager singles out Millennials, where there was a 42 percent increase in number of accounts receiving contributions and 51 percent increase in the amount of contribution dollars.
And it wasn’t only rates and the number of savers that increased, but also balances. Positive stock market performance and increasing contributions drove the average 401k and IRA balances to record levels of $95,500 and $98,100 respectively.
As more retirement savers recognized the benefits of IRAs and 401(k) accounts, the number of people with both an IRA and a 401k from Fidelity also increased by 9 percent in to almost 1.4 million. The average combined IRA/401(k) balance increased 5 percent year-over-year from $260,900 to $273,600, the highest average combined account balance ever.
“It’s encouraging to see the increasing number of people who contributed to their retirement savings this quarter,” Kevin Barry, president of workplace investing for Fidelity Investments, said in a statement. “While retirement account balances were aided by positive stock market performance in the first quarter, consistent saving in a retirement savings account–any account, whether that’s a 401k, IRA or both–can have a significant, positive impact on your long-term retirement success.”
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.
