Record number of 401(k) savers have balances over $1 million

By Jeanne Sahadi, CNN

New York (CNN) — They are still a very small minority in the 401(k) universe, but there were a record number of 401(k) participants with balances over $1 million at the end of the first quarter this year, Fidelity Investments said Thursday.

Specifically, 485,000 of them.

That’s up 15% from the 422,000 accounts reported at the end of 2023 and 43% higher than a year ago. Fidelity is one of the largest providers of workplace retirement plans, and its 401(k) data is based on more than 23 million plan participants. The record number of million-dollar-plus accounts was first reported by Bloomberg.

The average balance for the so-called 401(k) “millionaires” came to $1,580,000, up from $1,551,300 in the fourth quarter, a Fidelity spokesperson said.

There is no secret sauce for how a 401(k) participant can accumulate that kind of balance — or any kind of substantial balance for that matter. While market returns are key, even more essential is the amount one saves over time. The average 401(k) participant with a balance over $1 million, according to Fidelity, has been saving for 26 years and contributes 17% of their income, which includes any matches they receive from their employer.

Other 401(k) participants also saw increases in their balances in the first quarter. “Record-high contribution levels coupled with positive market conditions pushed average account balances to their highest levels since the fourth quarter of 2021,” Fidelity said. “Long-term savers observed the greatest improvement, which is good news, especially for the more than 4.9 million workers that have been in their 401(k) plan for five years or more.”

The average balance rose to $125,900, up 16% from a year ago. The average savings rate hit a record 14.2%, including employer matches, and is very close to the recommended 15% savings rate from Fidelity and retirement savings experts.

Among Gen Xers, who are next on deck to retire behind the Baby Boomers, those that have been saving continuously for 15 years had an average balance of $543,400, just a smidge higher than the $543,200 Baby Boomers in that category had saved over the same period.

Meanwhile, the number of 401(k) participants who had borrowed against their savings and still had a loan outstanding in the first quarter held steady relative to the fourth quarter at 17.8%, but that is up from 16.7% a year earlier.

Retirement readiness in the United States is an issue for a majority of workers, including the millions of employees who don’t have access to a workplace savings plan or who don’t participate if they do. Pensions have become scarce and nearly 50% of people don’t have any money saved in a retirement account, according to Federal Reserve data from 2022.

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