Fidelity Investments, the No. 1 recordkeeper for 401(k) plans, reports that the number of retirement plan millionaires has soared.
At the end of the third quarter, Fidelity says 187,400 401(k) participants in accounts that it services had $1 million or more in assets, up 41% from a year ago. In addition, 170,400 of Fidelity’s IRA account holders had topped the million-dollar-asset level, up 25% from a year ago.
The average balances for retirement plans Fidelity serves also rose, reaching a record high of $106,500 in the third quarter, up 2.4% from a year ago.
“We’ve seen an increasing amount of positive savings behavior over the last 10 years, which helped put many people back on track to reach their retirement goals,” said Kevin Barry, president of workplace investing at Fidelity Investments, in a statement.
Since that time account balances in 401(k), IRA and 403(b) plans serviced by Fidelity have roughly doubled, reflecting gains in the market and increased contributions from employees and employers, in a roughly two-to-one split.
The average savings rate combining employee and employer contributions rose to 13.1% in the third quarter of 2018, from 12.3% in 2016 (2017 stats were not disclosed) and the average contribution over the past 12 months was $6,800 for employees and $3,900 for employers.
The average 401(k) contribution rate for employees alone reached 8.7%, the highest rate since the fourth quarter of 2006; the contribution rate for women climbed to a record high of 8.5%.
Among employers, 98% are offering target date funds and 90% use them as the default investment option; 68% offer a Roth 401(k) option; and 45% who auto-enroll 401(k) participants default to a 4% rate, almost double the percentage of five years ago.
Among plan participants, 68% of millennials are 100% invested in a target date fund; 10.8% contribute to a Roth 401(k); and auto-enrollees have an average balance of $112,600 10 years later. Half of all 401(k) accounts are fully invested in target date funds.
Participation in defined contribution plans is paying off for long-time savers. Those who have contributed for 10 years straight in a 401(k) plan have an average balance of $305,400; those contributing for 15 consecutive years have an average balance of $400,300.
IRAs, like defined contribution plans, also saw their assets grow by the end of the third quarter. The average IRA account had assets of $111,000, and 10.1 million people had an IRA. Roth IRAs are the preferred savings vehicle for more than 45% of IRA contributions.
The Fidelity analysis is based on 24,900 corporate DC plans (including advisor-sold plans) with 15.5 million participants and 9.5 million IRA accounts as of Sept. 30.
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