Number of 401(k) plan and IRA millionaires hits record, with more millennials joining the ranks
News Team
Helped by consistent savings efforts and market gains, average retirement account balances reached fresh highs in the third quarter, according to Fidelity, the largest 401(k) plan provider in the U.S.
The number of 401(k) and IRA millionaires also hit all-time highs and, for the first time, millennials joined the group.
As the markets tested record highs, retirement savers reaped the benefits.
The average 401(k) plan balance ended the third quarter up 23% from a year earlier, at $132,300 — the highest average on record, according to a new report by Fidelity, the nation’s largest provider of 401(k) plans. The financial services firm handles more than 49 million retirement accounts altogether.
The average individual retirement account balance also rose 18% year over year to $129,200 in the third quarter of 2024.
Number of 401(k) millionaires jumps 9.5%
The number of 401(k) accounts with a balance of $1 million or more jumped to a record 497,000 as of Sept. 30, up 9.5% from the second quarter, according to Fidelity.
Similarly, the number of IRA-created millionaires increased by nearly 5% to a record 418,111.
“We are continuing to observe a dedication to saving for retirement, with contributions to these vehicles holding steady if not increasing,” Sharon Brovelli, president of workplace investing at Fidelity Investments, said in a statement.
Overall, the average 401(k) contribution rate, including employer and employee contributions, now stands at 14.1%, just below Fidelity’s suggested savings rate of 15%.
“These all-time highs are probably more attributable to market appreciation than anything else, but if contributions remain robust, that’s a good thing,” said Douglas Boneparth, a certified financial planner and president and founder of Bone Fide Wealth, a wealth management firm based in New York.
Positive savings behaviors were key to improved outcomes, said Mike Shamrell, Fidelity’s vice president of thought leadership.
A great year for the major indexes also helped. The Nasdaq is up 31% year to date, while the S&P 500 notched a 27% gain and the Dow Jones Industrial Average rose more than 16%.
However, there’s no secret or “hot stock” which helped savers achieve millionaire status, Shamrell said. “Taking a long-term view of savings has shown benefits.”
Although most savers who have reached that threshold are at, or near, retirement age, “we did see some millennials crack into this group,” Shamrell said.
More retirement savers tap their 401(k)
Still, savers also tapped their accounts to free up cash. The percentage of workers who took a loan from their 401(k), including for hardship reasons, ticked up to 18.7%, from 17.6% a year earlier.
“These are the types of numbers we would love to see go down to zero,” Shamrell said.
Federal law allows workers to borrow up to 50% of their account balance, or $50,000, whichever is less. However many financial experts similarly advise against tapping a 401(k) before exhausting all other alternatives since you’ll also be forfeiting the power of compound interest.
“From a planner’s point of view, this is one of those areas of last resort,” said Boneparth, who is also a member of CNBC’s Advisor Council.
At the same time, many households are also leaning heavily on credit cards to make ends meet, other research shows.
Americans now owe a record $1.17 trillion on their cards, 8.1% higher than a year ago, according to the Federal Reserve Bank of New York.
During times of financial stress, it may make sense to borrow from a retirement account, rather than rely on such high-interest debt, according to Fidelity’s Shamrell.
Unlike credit card and other debt, savers who borrow from their 401(k) pay themselves back with interest. Interest rates are also generally much lower than those of credit cards, which are currently more than 20% today — near an all-time high.
