The pool of 401(k) millionaires has reached an all-time high, totaling 654,000 in September, according to Fidelity Investments. This increase from 595,000 at the end of June reflects the robust performance of the US market, with the S&P 500 up 8.1%, the Nasdaq Composite up 11.2%, and the small-cap Russell 2000 up 12.4% in the same period.
The largest group of new millionaires are millennials, those between the ages of 29 and 44. This marks a significant shift from previous years, where 401(k) millionaires were primarily Gen X and Boomers. Michael Shamrell, vice president of workplace thought leadership at Fidelity Investments, noted that as millennials progress in their careers, they are reaching the million-dollar milestone at a faster rate.
The data from Fidelity’s 26,000 defined-contribution plans and other accounts show that 3.7% of millionaires are now millennials, up from 1.8% a year ago. Boomers make up 36% of millionaires, Gen X comprises 60%, and millennials account for 4%.
Average account balances have also hit record highs, with the average 401(k) balance at $144,400 and the average IRA account balance at $137,902, both showing a 5% increase from the end of June. Women’s average account balances have crossed the half-million-dollar mark for the first time, reaching $501,100, up 16.5% from a year ago.
The total average 401(k) savings rate remains at 9.5%, with an average employer contribution rate of 4.7%, resulting in a record high total contribution rate of 14.2%. Fidelity recommends a savings rate of 15% for retirement.
While the number of millionaire savers fluctuates with the market, it is essential to note that they make up a small percentage of Fidelity’s retirement savers. Nonetheless, the increase in the number of 401(k) millionaires, particularly among millennials, is a positive sign of financial growth and stability.
In conclusion, despite market fluctuations, the rise in 401(k) millionaires signals a positive trend in retirement savings. With millennials making significant strides in reaching the million-dollar milestone, it shows a promising future for retirement preparedness.
