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Retirement Planning > Saving for Retirement > 401(k) Plans

Here's What's Sparking a Surge in 401(k) Millionaires

By John Manganaro

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What You Need to Know

  • Research shows that retirees are taking advantage of the later RMD age prescribed by the Secure 2.0 Act.
  • Gen X has continued to see an increase in average fund totals.
  • Nearly four-fifths of savers were contributing enough to secure their employers' full match.

Improved market conditions and consistent contributions have helped to boost savings levels in workplace retirement plans to impressive heights, according to the latest data published by Fidelity Investments.

Average year-end account balances reached their highest level since 2022.

Even more impressive, the fourth quarter saw a 20% jump in the prevalence of 401(k) millionaires compared with Q3 2023, when the number of millionaires dropped as a result of tough market conditions. The number of millionaires in Q4 was also 11.5% higher than the second quarter of 2023, Fidelity reports, showing a steady increase in retirement account millionaires over time.

“This past year ended on a high note for retirement savers,” Sharon Brovelli, president of Workplace Investing at Fidelity Investments, said in a statement. “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.”

Savings Rates and Average Balances

Fidelity’s data shows that total 401(k) savings rates, reflecting combined employee and employer 401(k) contributions, remained steady at 13.9% in the fourth quarter. This is consistent with Q2 and Q3 2023 and up slightly from a year prior (13.7%).

Thanks to these contributions and market returns, average balances in 401(k)s climbed to $118,600, which is up 10% from the prior quarter and up 32% from a decade earlier. Individual retirement accounts balances increased to $116,600, marking a 6% increase over Q3 and a jump of 31% over 2013. The average for 403(b) plans hit $106,100, up 9% from the prior quarter and marking a 50% increase over the preceding decade.

The average balance for Gen X workers in their 401(k) plan for 15 years straight topped half a million dollars ($501,000) at year end 2023, illustrating the benefits of consistent savings, contributing enough to receive the employer match and taking a long-term approach to retirement.

Also notable is that the number of Roth IRAs opened by Gen Z savers increased 50% in Q4 2023 compared to Q4 2022, with average contributions increasing 1.1%. IRA accounts owned by female Gen Zers increased by 59% over the last year.

Positive Worker Behaviors

With required minimum distributions now generally kicking in around age 73 as a result of key Secure 2.0 Act provisions, most pre-retirees and retirees younger than 70 maintained a savings mindset and did not withdraw from their 401(k) plans, according to Fidelity. Specifically, while 94% of retirees age 73 and older made 401(k) withdrawals in 2023, just 20% of retirees at age 70, 71 or 72 made 401(k) withdrawals in 2023.

In addition to fluctuating economic conditions, Fidelity reports, positive savings behaviors also play an important role in helping workers reach their retirement goals. At the end of 2023, for example, 78% of 401(k) savers were contributing at a rate high enough to secure the full matching contribution offered by their employer.

In Q4 2023, 5% of workers changed their asset allocation, while 8.4% made at least one adjustments during the full year. Some 10% of employees increased their contribution rate in Q4, compared with 37.2% doing so for the full year.

Credit: Adobe Stock 

John Manganaro

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