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7 New Pieces of Good News on 401(k)s and IRAs: Fidelity

By John Manganaro

Slideshow May 24, 2024 at 10:12 AM Share & Print

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Fidelity Investments recently published its quarterly retirement analysis, showing that record-high contribution levels coupled with positive market conditions have pushed average account balances to their highest levels since the fourth quarter of 2021.

Long-term savers observed the greatest improvement in account balances, demonstrating the power of steady participation in tax-advantaged workplace retirement plans.

The update also spotlights the ways that small-business owners are embracing various opportunities to save for retirement, including through both individual-style plans focused on sole-proprietor owner-operators and options that allow employees to save and invest for the long term.

Overall, Fidelity’s data shows, Americans who have access to workplace retirement plans continue to make solid strides in their effort to prepare for life after work, despite the challenges presented by inflation, market volatility, geopolitical uncertainty and more.

See the accompanying slideshow for seven key data points drawn from Fidelity’s latest retirement update.

John Manganaro

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7 New Pieces of Good News on 401(k)s and IRAs: Fidelity

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1. Average contribution rates are above 14%.

As of the end of the last quarter, Fidelity reports, total average 401(k) savings rates had reached a record-tying high of 14.2%.

This level of savings is driven by employee and employer 401(k) contributions that matched previous record levels, at 9.4% and 4.8%, respectively. Notably, this savings rate is the closest it has ever been to Fidelity’s suggested savings rate of 15% including employee and employer contributions.

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2. Consistent participants have seen notable balance growth.

The average balance for five-, 10- and 15-year continuous savers increased strongly during the quarter, with 15-year savers seeing a 7% increase in their account balances. Fidelity experts say this demonstrates the value of consistently contributing in the same plan for an extended period of time.

Additionally, for the first time, the 15-year continuous balance for Gen X participants of $543,400 surpassed the 15-year continuous balance for baby boomers ($543,200).

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3. Roth growth among Gen Z remains impressive.

Fidelity’s Q1 update shows the number of Roth individual retirement accounts owned by members of Gen Z increased 71% in Q1 2024 over Q1 2023, with average contributions increasing by 11.1%.

IRA accounts owned by female members of Gen Z increased by 60% over the past year.

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4. The prevalence and performance of small-business plans is improving.

Fidelity’s Q1 update also highlights the strong savings behaviors of small-business retirement savers.

While prior industry research shows that only about 30% of small businesses offer a retirement savings benefit, Fidelity’s performance data for its SEP, SIMPLE IRAs and self-employed 401(k) offerings shows that these options are strongly embraced when put in place.

For example, Fidelity reports an average small-business plan balance of $152,000, with an 8% average participant contribution rate. This is slightly lower than the average for 401(k) plans in general, but small-business plans have a longer average tenure of 9.9 years, versus 8.6 for 401(k)s.

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5. Balances across retirement account types are up strongly over the decade.

The average balances for 401(k) plans may be slightly lower than highs seen in 2021, but they are up strongly over the prior decade. The same is true for balances in IRAs and 403(b) plans.

Specifically, 401(K) plan assets have increased 42% over the decade, rising to $125,900; IRA assets have climbed 29%, rising to $127,745; and 403(b) assets have jumped 60%, rising to $113,000. These values are up 6%, 10% and 7% on a yearly basis, according to Fidelity.

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6. The number of 401(k) millionaires surged 43% from a year ago.

Fidelity credits market gains and steady contributions for the boom. On average, Fidelity reports, these millionaires have been saving in their account for an average of 26 years.

Specifically, the first quarter had 485,000 401(k) millionaires. That was a 15% increase from last quarter, when there were 422,000, and a 43% increase from a year ago.

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7. There are more than 45 million retirement accounts at Fidelity alone.

Fidelity reports that its latest analysis reflected more than 45 million IRA, 401(k) and 403(b) accounts.

This number has grown steadily in recent years, having first topped the 30 million mark in 2019.

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