Number of 401(k) Millionaires Hits Record

Although many workers are still trying to find their footing with retirement savings, a record number of 401(k) participants have balances over $1 million as of the end of the first quarter of this year, Fidelity said.

Nearly half a million workers—485,000—hold a seven-figure balance in their accounts, according to Fidelity Investments’ first-quarter 2024 retirement analysis. That’s up a whopping 43% from the 340,000 401(k)-created millionaires a year ago.

The rise is helped by a strong stock market and record-high contribution levels.

Overall, those factors helped push average account balances to their highest levels since the fourth quarter of 2021, Fidelity found. The average 401(k) account balance now sits at $125,900, according to the firm’s analysis of 23.9 million participants. The average 403(b) account balance is $113,000.

Total average 401(k) savings rates hit 14.2%, a record for Fidelity’s tracking, driven by employee (9.4%) and employer (4.8%) contributions along with auto-escalation. That savings rate is the closest it has ever been to Fidelity’s suggested savings rate of 15% for employee and employer contributions combined.

Higher contributions and account balances are positive trends after inflation and financial stress resulted in negative behaviors in the past couple years, including more loans and withdrawals and low retirement confidence.

Sharon Brovelli, president of Workplace Investing at Fidelity Investments, called the news of higher contribution rates encouraging and proof that “retirement savers are remaining invested and continuing to make steady contributions.”

“With continued participation across generations and income levels, retirement savers will continue to build better financial futures, which is essential to the financial health of so many Americans and our economy.”

Fidelity’s first-quarter analysis comes on the heels of Bank of America’s first-quarter 2024 Participant Pulse data, which similarly found that employee 401(k) savings are up. The average account balance as of the end of March was approximately $92,000, up 17% compared to $79,000 at the same time last year, Bank of America reported. The average first-quarter contribution rate was 6.6%, up slightly from 6.5% at the end of 2023. In the first quarter, 1 in 5 401(k) plan participants changed their contribution rate, with roughly 15% increasing their contributions while 3.5% decreased their rate, Bank of America said.

Lisa Margeson, managing director of retirement research and insights at Bank of America, told SHRM Online that the data “indicates an upward trajectory of Americans reprioritizing long-term savings for retirement, which is an encouraging shift in consumer action and perspective.”

The news about employee retirement savings comes as most workers feel like they need a bigger nest egg for their post-work years. Recent figures from Northwestern Mutual found that on average, U.S. adults now believe they will need $1.46 million to retire comfortably, a 15 percent jump over the $1.27 million reported last year and a 53 percent surge from the $951,000 target they reported in 2020.

On average, both Generation Z and Millennials expect to need more than $1.6 million to retire comfortably. High-net-worth individuals—those with more than $1 million in investable assets—said they’ll need nearly $4 million.