(TND) — A record number of people have reached $1 million in their 401(k) retirement accounts, according to Fidelity Investments.
A Fidelity spokesperson Tuesday said they counted 485,000 such accounts as of the first quarter of the year, up 15% from the previous quarter and up 43% from a year ago.
Those “401(k)-created millionaires” have been in their plans for an average of 26 years and have an average contribution rate of 17%, the spokesperson said.
Fidelity also recently reported that record-high contribution levels paired with positive market conditions have pushed average account balances to their highest levels in over two years.
Fidelity’s metrics come from an analysis of 23 million 401(k) participants.
The average 401(k) balance in the first quarter was $125,900, up 16% from a year ago.
“That we’re peaking in terms of 401(k)s speaks to the fact that the stock market has been just on fire,” Colorado State University economist Stephan Weiler said.
The S&P 500 is up over 25% in the last year.
“It is one of the bright sides of the American economy that people have in fact been taking advantage of the 401(k) system,” he said.
But there’s still a lot of inequality in income and wealth, he noted.
A Census Bureau report from 2022 showed that just 58% of baby boomers and 56% of Gen X Americans owned at least one type of retirement account.
Less than half of millennials had a retirement account, as did just 7.7% of the youngest adults, Gen Z.
And the Department of Labor said last fall that more than a quarter of private industry workers with access to a defined contribution plan, such as a 401(k), did not participate.
Americans' household debt continued its steady increase in the first quarter, hitting a new high of $17.69 trillion.
Credit card balances were about 13% higher than they were a year ago.
And the personal saving rate is a low 3.2%.
The personal saving rate averaged 6.2% from 2016 through 2019, then it spiked during the pandemic.
But Americans have burned through a lot of their built-up savings.
Weiler said it’s a cause for concern when the personal saving rate goes below 5%.
The saving rate is a percentage of disposable income. So, the 3.2% now means Americans on average are only putting away about $3.20 per $100 of disposable income.
“You do have the ‘haves’ who have been feasting on the stock market,” Weiler said.
But he said he’s worried about the folks who are relying on Social Security to get them by in retirement.
“Social Security just isn't very much to live on,” Weiler said.
The Congressional Budget Office projects that under current law, Social Security will run out of reserves in less than a decade.
“That doesn't mean there's no money for retirees. But it does mean retirees can only get paid based on what's currently coming in, which is the equivalent of a 23% across-the-board cut,” Marc Goldwein, senior policy director for the nonpartisan and nonprofit Committee for a Responsible Federal Budget, previously told The National Desk. “And that's about $17,400 per couple, for a typical couple retiring that year.”
The future economy will be stronger if a big wave of retirees can keep spending.
Weiler said a 401(k) is a great savings mechanism.
“With the baby boomers being such a large lump of people going into retirement age, you're getting real stress on both Social Security and Medicare,” Weiler said.
FAQs
Specifically, 485,000 of them. That's up 15% from the 422,000 accounts reported at the end of 2023 and 43% higher than a year ago. Fidelity is one of the largest providers of workplace retirement plans, and its 401(k) data is based on more than 23 million plan participants.
How many Americans have $1 million in retirement? ›
According to the Federal Reserve's latest Survey of Consumer Finances, only about 10% of American retirees have managed to save $1 million or more. This leaves a significant 90% who fall short of this milestone. Don't Miss: The average American couple has saved this much money for retirement — How do you compare?
Is 1 million in 401k enough? ›
How long will $1 million in retirement savings last? In more than 20 U.S. states, a million-dollar nest egg can cover retirees' living expenses for at least 20 years, a new analysis shows. It's worth noting that most Americans are nowhere near having that much money socked away.
What percentage of retirees have $4 million dollars? ›
According to a 2020 working paper from the Center for Retirement Research at Boston College, the top 1% of retirees—which a retiree with $4 million in assets would fall into—can expect to pay about 22.7% in state and federal taxes.
How many people in the US have $1 M? ›
The gainers are, quite literally, the 1%. The report finds, for the first time, a little more than 1% of the adults in the U.S. are worth at least $1 million. There are 21,951,000 millionaires in the U.S., according to the 2021 Global Wealth Report by Credit Suisse.
How long will it take my 401k to reach $1 million? ›
Key Points. Time is on your side as an investor, so if you start early enough, you can reach $1 million by retirement age. If you start late, you can contribute up to $20,500 per year -- and even more if you are 50 and older.
Can you retire at 65 with $1 million dollars? ›
A recent analysis determined that a $1 million retirement nest egg may only last about 20 years depending on what state you live in. Based on this, if you retire at age 65 and live until you turn 84, $1 million will probably be enough retirement savings for you.
Can I live off the interest of 1 million dollars? ›
Once you have $1 million in assets, you can look seriously at living entirely off the returns of a portfolio. After all, the S&P 500 alone averages 10% returns per year. Setting aside taxes and down-year investment portfolio management, a $1 million index fund could provide $100,000 annually.
What percentage of retirees have $3 million? ›
Specifically, those with over $1 million in retirement accounts are in the top 3% of retirees. The Employee Benefit Research Institute (EBRI) estimates that 3.2% of retirees have over $1 million, and a mere 0.1% have $5 million or more, based on data from the Federal Reserve Survey of Consumer Finances.
How long will $1 million last in retirement by state? ›
For retirees in California, the annual cost of living expenses would be $72,319.57, meaning a $1 million retirement fund would last for about 14 years. Retirement can often last 25 years or more, according to Fidelity.
If you retire with $500k in assets, the 4% rule says that you should be able to withdraw $20,000 per year for a 30-year (or longer) retirement. So, if you retire at 60, the money should ideally last through age 90. If 4% sounds too low to you, remember that you'll take an income that increases with inflation.
Can I retire at 65 if I have $1 million in a 401k and will receive $2500 monthly from Social Security? ›
Here, say that you have $1 million in a 401(k) or IRA, and expect to receive $2,500 per month in Social Security payments, a number right in the mid-range of possible benefits. Can you retire at 65? Well, it certainly depends on your standard of living. But for most people the answer is yes.
What percentage of retirees have over $1 million? ›
In fact, statistically, around 10% of retirees have $1 million or more in savings. The majority of retirees, however, have far less saved. If you're looking to be in the minority but aren't sure how to get started on that savings goal, consider working with a financial advisor.
What does the average American retire with? ›
What are the average and median retirement savings? The average retirement savings for all families is $333,940, according to the 2022 Survey of Consumer Finances. The median retirement savings for all families is $87,000. Taken on their own, those numbers aren't incredibly helpful.
What percentage of retirees have $2 million? ›
According to EBRI estimates based on the latest Federal Reserve Survey of Consumer Finances, 3.2% of retirees have over $1 million in their retirement accounts, while just 0.1% have $5 million or more.
How much income can $1 m generate? ›
Saving a million dollars is a big achievement, but many Americans fear it won't be enough. One rule of thumb suggests $1 million would generate around $40,000 each year, adjusted upward for inflation. Instead of picking a figure, work out what income you might need in your old age and work backward from there.
How long will $2 million in 401k last? ›
You retire at 40 – With an estimated life expectancy of 90, you need 50 years of income. Across those years, $2 million could equate to approximately $40,000 annually or $3,333 monthly. This should be enough to cover you, but things may be tight if your outgoings are high as a retiree.
What is the average dollar amount in a 401k? ›
Average and median 401(k) balances by age
| Age range | Average balance | Median balance |
|---|
| 35-44 | $76,354 | $28,318 |
| 45-54 | $142,069 | $48,301 |
| 55-64 | $207,874 | $71,168 |
| 65+ | $232,710 | $70,620 |
2 more rowsMar 13, 2024
A $5-million nest egg will fund a comfortable lifestyle by most standards. Using a 4% withdrawal rate, you could have $200,000 to spend annually and be reasonably sure that you would not run out of money during a 30-year retirement.
