The fourth quarter ended on a high note for retirement savers.
Retirement account balances have reached a two-year high amid improving market conditions and steady savings rates, according to Fidelity Investments.
The average 401(k) account balance was $118,600 in the fourth quarter, up 14% from a year ago, Fidelity said. The average IRA balance was $116,600, up 12% from last year. The average 403(b) balance was $106,100, up 14% from last year.
“Last year ended well for retirement savers,” said Sharon Profili, head of workplace investing at Fidelity Investments. “When it comes to things like market stability and economic events, 2023 has given us highs and lows, but it's encouraging that many retirement savers have taken a long-term view and stayed the course through it all, the kind of commitment that can lead to a future My money is safe.
For Gen Generation X represents people born from 1965 to 1980.
The fourth quarter also saw a jump in the number of 401,000 millionaires, Fidelity said. The number of people with at least $1 million in their 401(k) plan rose to 422,000, up 20% from the third quarter of 2023, when the number of millionaires declined due to market conditions. The fourth quarter also showed an 11.5% increase over the second quarter of 2023.
“Americans love the title of millionaire or the idea of a million dollars,” said Michael Shamrell, vice president of thought leadership for Fidelity's workplace investing division. “401(k) millionaires exhibit a lot of positive traits. The average lifespan of millionaires is 26 years. This goes back to 1998. They saw the dot-com bust, they saw 9/11, they saw the market go up and down, and they are examples of continuing to… This path.
Shamrill said the savings rate for millionaire investors was 26.6%, and includes their personal investments as well as employer contributions.
“It is recognized that not everyone can save at these rates,” he said.
Overall, the total 401(k) savings rate held steady at 13.9%, including employee and employer contributions, which is consistent with the second and third quarters of 2023 and up slightly from the previous year's fourth-quarter rate of 13.7%, Fidelity said. . .
In 2023, 37% of workers increased their retirement savings contribution rate, Fidelity said.
With required minimum distributions not beginning until age 73, pursuant to provisions of the Secure 2.0 Act of 2022, most pre-retirees and retirees under age 70 have maintained a savings mindset and have not withdrawn from their 401(k) plans. Only 20% of retirees ages 70 to 72 have made 401(k) withdrawals. A total of 94% of retirees age 73 and older have made 401(k) withdrawals in 2023.
Among Generation Z investors — those who belong to the generation born from 1997 to 2012 — the number of Roth IRA accounts rose 50% in the fourth quarter of 2023, compared to the same period a year earlier. Roth IRAs feature after-tax contributions and tax-free withdrawals.
“We continue to see positive savings behaviors across the board for Gen Z. The numbers are really positive,” Shamrill said. “We need to keep an eye on them, as the eldest [Gen Z members] They are approaching their late twenties, when they may consider getting married and buying a home. “We want to monitor them to see if their positive saving behavior continues.”
