The number of 401(k) millionaires rose 43% from a year ago, boosted by market gains and steady contributions. But according to Fidelity Investments, those millionaire success stories were an average of 26 years in the making.
The first quarter saw 485,000 401(k) created millionaires. That was a 15% increase from last quarter, when there were 422,000, and a 43% increase from 340,000 a year ago, Fidelity said.
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Of course, these millionaires didn’t become rich overnight. Rather, these account holders have been in their plans for an average of 26 years and have an average contribution rate of 17%, according to Fidelity.
The average first-quarter balance for 401(k) accounts was $125,900, up 16% from the first quarter a year earlier. The average 401(k) balance was $28,900. For 403(b) accounts, the retirement accounts for government and nonprofit workers, the average balance was $113,000, up 15% from a year ago.
Meanwhile, the average IRA balance reached $127,745, up 13% from the previous year, according to Fidelity. IRA accounts typically have slightly higher balances than 401(k)s because people often consolidate multiple 401(k)s into an IRA, Fidelity said.
Fidelity said the analysis reflected more than 45 million IRA, 401(k) and 403(b) accounts.
“We are encouraged to see account balances increasing, providing solid evidence that retirement savers are staying invested and making stable contributions – while seeing the financial benefits,” said Sharon Brovelli, president of workplace investing at Fidelity.
The S&P 500 index SPX rose 10.6% in the first quarter.
Although gains in retirement accounts showed an improvement, average account balances still lag far behind what Americans think they need to retire. According to Northwestern Mutual’s 2024 Planning & Progress Study, U.S. adults believe they will need $1.46 million to retire comfortably.
Read: How much do you need to retire? America’s ‘magic number’ rises to $1.46 million.
The overall average 401(k) savings rate reached a record high of 14.2% in the first quarter, driven by both employee and employer contributions. This savings rate is closest to Fidelity’s proposed 15% retirement savings rate, the company said.
The report also reflected the benefit of continued savings. People who saved for 15 years saw their account balances increase by 7%, according to Fidelity. For the first time, the 15-year continuous balance for Generation Gen
Even with robust savings rates, Fidelity noted that people continued to borrow from their 401(k) accounts. A total of 17.8% of employees had such a loan in the first quarter, which was similar to the fourth quarter rate but higher than the 16.7% rate a year ago, Fidelity said.
Although only 30% of small businesses offer a retirement savings plan, Fidelity found that employees at small businesses who had access to a retirement plan had higher balances than the average 401(k) account.
Small business retirement plans had an average balance of $152,000 with an average contribution rate of 8% – which was higher than the 9.3% deferral rate for a traditional 401(k), according to Fidelity. The small business accounts reflected SEPs, simple IRAs and self-employed 401(k)s.
“Small businesses are the heart of America’s communities and it’s encouraging to see that when small business employees have the opportunity to save, they take advantage of it,” said Roger Stiles, president of Fidelity Wealth. “Providing small businesses with a variety of options to meet their retirement needs is an important way to close any existing gaps in retirement coverage and help more Americans save for retirement.”
