Markets, Financial Planning, Retirement

The Rising Number Of 401(k) Millionaires

11/21/19 12:00 PM

Consistent participation in a tax-advantaged 401(k) plan can lead to substantial growth in your retirement nest egg. This is supported by an updated report from Fidelity Investments which found that the average account balance for workers who have been in their company’s 401(k) plan for fifteen consecutive years ended the third quarter of 2019 at $398,000. That is a 650 percent increase since 2004 for this group of participants, but even workers who only more recently became persistent with their contributions have still been able to achieve significant growth in their retirement assets.


In fact, Millennials who continuously invested in their employer’s defined contribution (DC) plan for just the past 10 years have already amassed an average 401(k) balance of $137,300. Although the 2nd-longest bull market in history has obviously supported the rapid growth in retirement account balances over this last decade, the strong economy has arguably played a much bigger role in helping Americans prepare for a comfortable and financially secure retirement. Indeed, rising incomes and a greater number of jobs that provide access to 401(k) plans with accompanying matching contributions are welcome side-effects of a tightening labor market, and workers appear more than willing to take advantage of this favorable environment. The average contribution rate among all 401(k) participants in Fidelity’s sample, for instance, jumped to 13.4 percent last quarter (including employer contributions), and the combined dollar value increase in per annum contributions has risen by $1,530 in just the past five years.


IRA contributions have also improved, and the combined average balance for participants in both these plans and 401(k)s climbed to an all-time high in Q3. Further, the number of 401(k) participants with $1 million or more in their account increased to 200,000 last quarter, and the number of IRA participants with at least a million dollars similarly rose to a record. Fidelity’s Meghan Murphy added that “one trend contributing to rising balances, both overall and in millionaire accounts, was the tendency of 401(k) savers to stay invested rather than shift assets to cash and bonds from stocks during market volatility.” The report’s authors, though, did caution that many older participants were “too aggressively invested [in equities], potentially putting them at risk so close to retirement.” This is another reason to regularly consult with a professional financial advisor to make sure your positioning is properly aligned with your risk tolerance, retirement goals, and other unique variables. As always, we are here to help with any questions you may have.



Sources: Fidelity Investments, Investor’s Business Daily

Post author: Charles Couch