7 New Findings on Workers' Retirement Account Balances: Fidelity

Slideshow August 28, 2024 at 03:33 PM Share & Print

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Strong contribution levels and positive market conditions have driven average retirement account balances to the third-highest average on record, according to a new quarterly analysis published by Fidelity Investments.

While smaller than the previous two quarters, the growth rate in the second quarter of 2024 was substantial — even as investors had to navigate significant bouts of volatility triggered by apprehension about inflation, interest rates and the potential for recession.

Other points of concern have included an apparent cooling in the labor market and the persistence of some big geopolitical risks, not to mention that U.S. markets tend to get jittery ahead of a presidential election.

However, with Jerome Powell, the Federal Reserve chair, signaling that a rate cut is likely in September, investors are hoping that the U.S. economy can avoid a recession and allow balances to continue their upward trajectory.

Here are seven findings drawn from Fidelity’s new report.

John Manganaro

NOT FOR REPRINT

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1. IRA balances are up 14% since this time last year.

Fidelity’s report shows that the average individual retirement account balance on its platform is $129,000, up 1% from the prior quarter and up 14% from a year earlier. Relative to a decade ago, the average balance has increased some 40%.

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1. 401(k) balances have grown 13% since Q2 2023.

The report shows the average 401(k) balance has grown nearly as quickly as the average IRA balance. As of the end of the second quarter, the average balance stood at $127,100.This is up 1% from the prior quarter and up 13% from a year earlier.Relative to a decade ago, 401(k) account balances have increased 39%.

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3. 403(b) accounts have grown 57% over the decade.

While 403(b) plans' average balance of $114,700 lags behind other retirement account types, the rate of growth has been impressive. Specifically, such accounts have grown 2% since the prior quarter, 12% since a year ago and 57% relative to the second quarter of 2014.

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4. Record savings rates have held steady.

Fidelity reports that total average 401(k) savings rates remained consistent during the quarter, at 14.2%, driven by employee and employer 401(k) contributions. Both types of contributions stand at record levels, according to Fidelity, with workers contributing 9.4% of pay on average and employers providing average matching contributions of 4.8%. This savings rate is the closest it has ever been to Fidelity's suggested savings rate of 15% across both employee and employer contributions.

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5. Average balances for long-term savers are particularly impressive.

The average balance for five-, 10-and 15-year continuous savers increased again during the quarter, demonstrating the value of consistently contributing in the same plan for an extended period of time. For example, 15-year Gen X savers continue to see their savings increase, with an average balance this quarter of $554,000 compared to $543,400 in the prior quarter. Fidelity's analysis calls this a promising sign as this generation approaches their retirement years.

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6. Retirement-account millionaires reached another record.

The second quarter saw another all-time high in retirement-account millionaires, according to Fidelity, with 401(k)-created millionaires increasing by 2.5% to 497,000. The number of IRA-created millionaires grew by 6% to 398,594. These individuals were able to reach this level of retirement savings by starting early and contributing consistently over many years, according to the report.

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7. Workers at nonprofits have doubled down on retirement savings.

The latest report reveals that retirement readiness measures for nonprofit employees have steadily increased over the past decade. Participation rates have growth from 72% to 82%, while savings rates have increased from 8.5% to 11.2%. Some 84% of non-profit plan participants are using what Fidelity considers age-appropriate asset allocations, up from 68%.

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