America is currently seeing an unprecedented rise in the number of retiring millionaires. Let’s take a look at what’s causing this.
Millionaire Milestone
The stock market is booming, and with it, a lot of people’s retirement accounts. Thanks to its recent performance, the number of 401(k) millionaires has hit an all-time high.
401(k) Accounts Hit Record Highs
According to Fidelity Investments, at the end of the first quarter, there were around 485,000 accounts with over a million dollars deposited.
Boosting Retirement Dreams
That’s a 15% jump from 422,000 at the end of 2023 and a huge jump from a year ago when there were only 340,000.
Stock Surge
The stock market’s recent surge is affecting more than just the super-wealthy – anyone with money in a retirement account is seeing some good gains.
Record Number of Millionaires
The S&P 500 index shot up over 10% in the first quarter alone and has climbed 26% over the past year. This is great news for any 401(k) holders.
Market Magic
On average, 401(k) balances reached $125,900 in the first quarter – 16% higher than a year ago. Fidelity’s data shows that steady contributions and market gains are paying off for thousands of people.
Retirement Riches
“Record-high contribution levels and a strong market pushed account balances to their highest levels since late 2021,” Fidelity said. It’s clear more and more people are seeing the importance of saving for retirement.
Investing in the Future
The average 401(k) millionaire has been saving for 26 years, depositing 17% of their income, including both employee and employer contributions.
Savings Success
The average 401(k) saver isn’t doing too badly either – they had a savings rate of 14.2% in the first quarter. This is the highest ever, up from 13.5% in 2019.
IRA Increases
The good news isn’t limited to 401(k) plans. Individual Retirement Accounts (IRAs) and 403(b) accounts are also seeing big gains.
Public Sector Gains
The average IRA balance jumped to $127,745, up 13% over the past year.
403(b) accounts, which are for public-sector and nonprofit employees, saw their average balance increase to $113,000 – a 16% boost from last year.
Savings Struggles
Hitting the $1 million mark in a 401(k) is impressive, but a lot of people are still struggling across the nation.
Retirement Reality Check
Many Americans are still way behind on their retirement savings. A recent survey by Northwestern Mutual found that most U.S. adults think they will need about $1.5 million to retire comfortably.
Generational Gap
The survey found that expectations differ slightly over different generations.
Gen Z (born 1996-2021) expects to need $1.63 million for retirement, but they have saved only $22,800 on average.
Millennials (born 1981-1995) believe they’ll need $1.65 million, with average savings of $62,600.
Gen X (born 1965-1980) estimates needing $1.56 million but has saved an average of $108,600.
Baby Boomers (born 1955-1964) expect to need $990,000 and have saved $120,300 on average, showing the smallest gap between expectations and savings.
Will $1 Million Be Enough?
Even among the newly minted 401(k) millionaires, there are concerns about whether their savings will suffice in the long run.
Rising Concerns
With rising costs, healthcare expenses, and potential economic issues, $1 million might not stretch as far as it used to.
Time to Review Your 401(k)
If you’re among the millions of Americans with a 401(k), now is a good time to review your savings strategy. The recent market gains offer a great opportunity to boost your contributions and reassess your retirement goals.
Strategy Session
Up Your Contributions: Try to increase your contribution rate to get the most out of any employer matching programs and the magic of compound interest.
Diversify Your Portfolio: Make sure your investments are spread out to manage risks and maximize returns.
Plan for the Future: Regularly review your retirement plan to ensure it’s on track with your long-term goals, and make adjustments as needed.
Smart Saving
The boom in 401(k) millionaires shows that consistent saving really is the way to maximize your retirement plans. By staying proactive and making smart moves, more Americans should be able to join the ranks of 401(k) millionaires and enjoy a secure retirement.
Featured Image Credit: Shutterstock / Monkey Business Images.
The content of this article is for informational purposes only and does not constitute or replace professional advice.
The images used are for illustrative purposes only and may not represent the actual people or places mentioned in the article.
