March 15, 2012

Investors With Dual Retirement Plans Outpace Balances in Pure IRAs, 401(k)s

Fidelity says investors with a 401(k) and an IRA save almost three times as much as investors with a single plan

Combined 401(k), IRA BalancesThe average balance for investors in Fidelity 401(k) and IRA plans combined is $212,600, compared with $71,700 for someone with only a Fidelity IRA, the investment group said Wednesday. For workers with a just a Fidelity 401(k), the balance is even lower: $69,100.

“This unique and integrated analysis covering more than 18 million accounts clearly underscores the importance of using both an IRA and 401(k) to help maximize long-term, tax-deferred growth potential, and as essential complements to other retirement income sources such as Social Security, a pension, annuities and brokerage accounts,” Kathleen Murphy, president of personal investing for Fidelity Investments, said in a statement.

Investors with both retirement plans make much larger annual contributions than investors who have just one type of plan, the study found. The average annual contribution for investors with both an IRA and a 401(k) is $10,300, but the average annual contribution for someone with only an IRA is just over $4,000. Investors with 401(k)s contribute slightly more, $5,750, every year.

Fidelity also studied balances in plans owned by people in or near retirement and found the average combined balance for someone between 65 and 69 was $359,000. For 401(k)-only investors, the average balance was $123,400. IRA-only investors had an average $133,500 saved in their plan.

Again, annual contributions for investors between 65 and 69 were lower among investors in single plans. Investors with both a 401(k) and an IRA contributed $11,040 per year, compared with $7,810 from 401(k)-only investors and $4,910 from IRA-only investors.

“The economic downturn of the last several years combined with an aging working population has resulted in greater, more complex needs on the part of our 401(k) participants,” James MacDonald, president of workplace investing for Fidelity Investments, said. In fact, one-on-one retirement planning sessions increased 8% in 2011 among both workplace participants and individual investors. Seminar attendance increased 32%. 

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