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Retirement balances are at their highest in nearly two years, with 20% jump in 401(k) millionaires

The fourth quarter ended on an upswing for retirement savers.

Retirement-account balances hit their highest levels in two years amid improved market conditions and consistent 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 a year ago. The average 403(b) balance was $106,100, up 14% from a year ago.

“This past year ended on a high note for retirement savers,” said Sharon Brovelli, president of workplace investing at Fidelity Investments. “When it comes to matters like market stability and economic events, 2023 gave us the highs of the highs and the lows of the lows, but encouragingly, many retirement savers took the long view and stayed the course through it all, which is the type of commitment that can lead to a secure financial future.” 

For Gen X workers who had invested in a 401(k) for 15 years straight, the average balance topped half a million dollars ($501,000) at year-end 2023, which Fidelity said illustrated the benefits of consistent long-term savings. Gen X represents people born from 1965 to 1980.

The fourth quarter also saw a jump in the number of 401(k) millionaires, Fidelity said. The number of people with at least $1 million in their 401(k) increased to 422,000, up 20% from the third quarter of 2023, when the number of millionaires had dropped due to market conditions. The fourth quarter also showed an 11.5% increase from the second quarter of 2023.

“Americans love that millionaire title or that idea of a million dollars,” said Michael Shamrell, vice president of thought leadership at Fidelity’s workplace investing division. “The 401(k) millionaires  demonstrate a lot of positive attributes. The average tenure of the millionaires is 26 years. That’s going back to 1998. They’ve seen the dot-com crash, 9/11, they’ve seen the market go up and down and they are examples of staying the course.”

The savings rate for the millionaire investors was 26.6%, which includes their personal investments as well as contributions from their employer, Shamrell said.

“Admittedly, not everyone can save at those rates,” he said.

Overall, the total 401(k) savings rate remained steady at 13.9%, including employee and employer contributions, which was consistent with the second and third quarters of 2023 and up slightly from the prior year’s fourth-quarter rate of 13.7%, Fidelity said. 

And in 2023, 37% of workers increased their retirement-savings contribution rate, Fidelity said.

With required minimum distributions not kicking in until age 73, according to provisions in 2022’s Secure 2.0 Act, most pre-retirees and retirees under age 70 maintained a savings mindset and did not withdraw from their 401(k) plans. Only 20% of retirees ages 70 to 72 made 401(k) withdrawals. A total of 94% of retirees ages 73 and older made 401(k) withdrawals in 2023.

Among Gen Z investors — those in the generation born from 1997 to 2012 — the number of Roth IRA accounts increased by 50% in the fourth quarter of 2023, compared with the same period of the previous year. 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,” Shamrell said. “We need to keep an eye on them, as the oldest [Gen Z members] are approaching their late 20s, when they might be thinking about getting married and buying a house. We want to keep an eye on them to see if the positive savings behavior continues.”

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