Record 401k account balance averages at $130,700. Record number of 401k millionaires topping 442,000. Nearly 40% of individuals increased their 401k contributions in 2021, also a record.
What do all these records have in common? They all happened in the midst of the “Great Resignation,” according to Fidelity Investments’ Q4/2021 year-end analysis of more than 35 million IRA, 401k, and 403b retirement accounts, further reinforcing the critical role employers are playing to help keep workers’ retirement savings on track.
In addition to insight on average account balances and contribution rates, Fidelity also took this opportunity to note steps both employers and employees are taking to keep their savings on track despite the Great Resignation, since there has been a lot of discussion around how job changes tied to the phenomenon might impact workers’ ability to save for retirement.
Some highlights?
• Despite the market swings in Q4, both the average 401k and 403b hit record levels in the quarter, and all retirement accounts (including IRAs) saw gains over the full year.
• Workers continued to save consistently for retirement, but employers were also playing their part—83% of workers had their employer make a contribution in addition their own 401k contributions.
• According to a recent Fidelity survey, only 6% of workers cashed out their 401k when they changed jobs.
“Despite facing a variety of financial hurdles in 2021, including ongoing market uncertainty and a shifting employment landscape, investors did not let the events derail their efforts and continued to stay focused on the key fundamentals of retirement savings.”
Kevin Barry, Fidelity Investments
• Nearly four in 10 (38%) employers automatically enroll new employees in their 401k—and once they are automatically enrolled, 9 out of 10 employees stay in the plan. Fidelity reports more than 1.1 million workers were automatically enrolled in their company’s 401k plan in 2021.
• Also, companies are enrolling employees in their 401k a higher contribution rate—more than a third (37%) of plans that use auto enrollment will sign up new employees at a 5% contribution rate or higher. This is up from 28% of plans five years ago.
“Despite facing a variety of financial hurdles in 2021, including ongoing market uncertainty and a shifting employment landscape, investors did not let the events derail their efforts and continued to stay focused on the key fundamentals of retirement savings,” said Kevin Barry, president of Workplace Investing at Fidelity Investments. “By making regular contributions to retirement accounts, not cashing out savings when they change jobs and taking advantage of their employer’s contributions, individuals were able to keep their savings on track as we head into 2022.”
Here’s a closer look at the numbers from Fidelity’s Q4 2021 analysis:
Retirement account balances see strong gains in 2021
• The average 401k balance climbed to a record $130,700 in Q4, up 4% from Q3 2021 ($126,100) and 8% from a year ago ($121,500).
• The average 403b account balance increased to a record $115,100, an increase of 4% from last quarter and an 8% increase from Q4 2020.
• The average IRA balance was $135,600, a slight decrease from last quarter but a 6% increase from Q4 2020.
401k millionaire total smashes record
• Fidelity told 401k Specialist its 401k platform had 442,000 millionaires (those with account balances of at least $1 million) as of the end of 2021, up from 404,000 at the end of Q3 2021. The previous record was 412,000, reported at the end of Q2 2021. At the end of 2020, there were 334,000 401k millionaires.
• When it comes to 403b millionaires, Fidelity has 87,000 as of the end of 2021.
• Fidelity’s IRA millionaire ranks swelled to 376,100, up from 356,300 after Q3 2021 and 288,000 at the end of 2020.
More than a third of workers increased their 401k and 403b savings rates
• A record 38% of individuals increased their 401k contributions in 2021, with an average increase of more than 3%. Among Gen Z workers, 53% increased their contribution rate in 2021, as well as more than one-in-three (38%) women investors on Fidelity’s 401k platform. In addition, 34% of 403b savers increased their contribution rate in 2021.
Employers continue to contribute to their employees’ retirement savings
By the end of 2021, 83% of workers had their employer make a contribution in addition their own 401k contributions, with the average employer contribution reaching $4,080 in 2021. In addition, 75% of individuals with a 403b received a contribution from their employer in 2021.
Workers focus on retirement savings, even as many switch jobs
As expected, there were noteworthy shifts across Fidelity’s platform among young workers in 2021, but also among older workers who had chosen to make a career change. Fidelity found that positive worker behavior, combined with increasingly popular 401k plan features, may dampen any notable impact to American worker’s retirement savings in the wake of the Great Resignation.
For example, look to the fact that only 6% of workers cashed out their retirement savings when leaving their job, according to a recent Fidelity study. Instead, nearly one quarter rolled their savings to an IRA (23%), 15% rolled their savings into their new employer’s 401k or 403b plan and 18% decided to leave their savings with their previous employer. Another 22% indicated they are planning to do something with their savings but haven’t taken any steps yet.
Employees are also reaching out more for help and guidance. Fidelity said it fielded 16.5 million calls from 401k and 403b investors last year, and visits to NetBenefits, Fidelity’s online employee benefits portal, reached 366 million in 2021.
Fidelity also had financial planning engagements with more than four million households in 2021, an 82% increase over the previous year.
For more information on Fidelity’s Q4 2021 analysis, click here.
SEE ALSO:
• Retirement Savings Mostly Flat, But Some Bright Spots: Fidelity
• 100,000 Milestone Passed for TSP Millionaire Club
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.
