as market Testing all-time highs, retirement saver Benefits gained.
average 401(k) According to the latest report for the third quarter of 2019, plan balances increased 23% year over year to $132,300, the highest average on record Fidelitythe nation’s largest provider of 401(k) plans. In total, the financial services company manages more than 49 million retirement accounts.
average individual retirement account Balances in the third quarter of 2024 also grew 18% from the same period last year, reaching $129,200.
Number of 401(k) millionaires jumps 9.5%
The number of 401(k) accounts with balances 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.
Likewise, the number of IRA millionaires increased by nearly 5% to a record 418,111.
“We remain committed to saving for retirement and contributions to these vehicles have remained stable, 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, is currently 14.1%, just below Fidelity’s recommended savings rate of 15%.
“These all-time highs are probably more attributable to market appreciation, but if contributions remain strong, that’s a good thing,” said Douglas Boneparth, a certified financial planner and the company’s president and founder. sincere wealtha New York-based wealth management firm.
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Mike Shamrell, vice president of thought leadership at Fidelity, said positive savings behaviors are key to improved outcomes.
A stellar year for the major stock indexes also helped. this Nasdaq It’s up 31% year to date, while S&P 500 Index An increase of 27%, Dow Jones Industrial Average An increase of more than 16%.
However, Shamrell said there are no secrets or “hot stocks” that can help savers become millionaires. “Thinking about saving over the long term has shown benefits.”
While most savers who reach this threshold are at or near retirement age, “we do see some millennials breaking into this group,” Shamrell said.
More retirement savers choose 401(k)
Nonetheless, savers also Bugged their account to free up cash. The share of workers who took out a 401(k) loan, including for hardship reasons, rose to 18.7% from 17.6% a year ago.
“We would like to see these numbers go down to zero,” Shamrell said.
Federal law allows employees to borrow up to 50% of the account balance, or $50,000, whichever is less. However, many financial experts similarly recommend not using a 401(k) until you have exhausted all other options because you will also lose The power of compound interest.
“From a planner’s perspective, this is one of the last resorts,” said Bonepas, who also CNBC Advisory Board.
At the same time, many families also rely heavily on credit card Other studies suggest that in order to make ends meet.
Americans now owe record amounts $1.17 trillion The balances on their cards are 8.1% higher than a year ago, according to the Federal Reserve Bank of New York.
Fidelity Investments’ Shamrell said borrowing from retirement accounts may make more sense during tough economic times than relying on such high-interest debt.
Unlike credit cards and other debt, savers Borrow from their 401(k) Pay yourself back with interest. Interest rates are also typically much lower than credit card rates, which are currently over 20% — close to record high.
