401(k) participants have had a good year, especially those with balances of at least $1 million, as the number of 401(k) “millionaires” reached a record high in the second quarter. Nearly half a million 401(k) accounts had balances of $1 million or more, with the average balance reaching $1,595,200, according to Fidelity Investments. This data was based on 24 million accounts across 26,000 employer-sponsored plans administered by Fidelity.
For the majority of 401(k) participants, the numbers were less impressive, with a mix of good and bad news. While the average savings rate was 14.2% of income, just below the 15% recommended by retirement experts, the average balance across all participants increased to $127,100, up 1% from the first quarter. However, overall averages do not accurately reflect how different age groups are faring.
Gen Xers, in particular, are a concern as the average balance for all Gen Xers with a 401(k) was $182,100, with a median balance of $55,500. Despite this, those who have been saving in a 401(k) for at least 15 years saw their average balance increase to $554,000. Fidelity’s data includes accounts of new employees or those who rolled over their savings from another provider, potentially skewing the averages. Gen X contributions to IRAs rose 30% over the last year, but concerns remain about their retirement savings.
Policy experts are particularly worried about Gen Xers and private-sector workers who lack access to or cannot afford to participate in a 401(k). There is concern that their savings may not be sufficient to maintain their standard of living in retirement, forcing them to rely heavily on Social Security. Overall, there is a gap between those with substantial 401(k) balances and those who are struggling to save enough for retirement.
While the average 401(k) balance for participants has increased, the numbers vary greatly across different age groups. The focus is on saving consistently over the course of a career to build a secure retirement nest egg. With concerns about the ability of some groups to save enough and the reliance on Social Security in retirement, there is a need for increased awareness and action to address the disparities in retirement savings. Policy changes may be necessary to ensure future retirees are adequately prepared for their golden years.
