The average 401(k) account balance rose for the second straight quarter, up 2 percent in the third quarter of 2016 and 7 percent over this time last year to reach $90,600.
The average IRA balance increased 5 percent from the second quarter and 6 percent year-over-year to hit $94,100, according to Fidelity’s study of its investors.
Long time savers experienced even better trends. Fidelity’s analysis of 401(k) savers who have been in their company’s 401(k) plan for 15 years straight shows the average account balance reached $331,200 at the end of the third quarter.
In 2001, these individuals had an average account balance of about $43,900, which Fidelity, the country’s largest record keeper, says illustrates “how a consistent focus on savings can deliver long-term benefits.”
The number of Fidelity Roth IRA accounts reached 2 million at the end of the quarter, a 5 percent increase from a year ago. Since 2011, more than 500,000 Roth IRA accounts were added, and during that time the number of millennials with Roth IRA accounts more than doubled to 353,000, according to the Boston-based investment behemoth.
Despite recent market volatility, the percentage of 401(k) savers who changed their asset allocation dropped to 7.4 percent, the lowest rate ever and down from 8.5 percent a year ago.
One reason for this trend is that more people are saving all of their 401(k) assets in a target date fund. At the end of the third quarter, 44 percent of Fidelity’s 401(k) savers had all their 401(k) savings in a target date fund, up from 41 percent a year ago.
Health Care Cost Concerns Drive a Significant Rise in Health Savings Accounts
Fidelity also saw a significant increase in the number of people using health savings accounts (HSAs) to cover current and future qualified medical expenses. In the past year, the number of HSAs provided by Fidelity grew 43 percent to 501,000, with an average HSA balance of $3,150.
A Fidelity analysis shows that while more people are using HSAs, they’re not spending as much as they thought they would. In fact, three-quarters (76 percent) of HSA account holders withdrew less than they contributed to their HSA.
As a result, Fidelity is seeing more people carry over their HSA balance from year-to-year, and an increasing percentage of people investing their HSA dollars to grow their account, which can help to address future qualified medical expenses, including expenses in retirement.
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.
