The number of Americans achieving 401(k) millionaire status experienced a remarkable surge, marking a 20% increase from September to the end of December, as reported by Fidelity Investments. By the close of 2023, there were 422,000 individuals in Fidelity 401(k) plans boasting account balances surpassing $1 million, up from 349,000 in September and 299,000 in 2022. This positive trend extends to Individual Retirement Account (IRA) millionaires, with their numbers reaching 391,562 at the end of December, up from 338,725 in September and 280,320 in December 2022.
Fidelity Workplace Investing’s Vice President of Thought Leadership, Michael Shamrell, expressed encouragement over the substantial growth in retirement balances during the last quarter, attributing it to improved market conditions and enhanced retirement preparedness. The average account balances at the close of the year reached their highest levels in nearly two years, fueled by a combination of a robust stock market, increased contributions, and a rising savings rate.
The positive trajectory also includes a notable uptick in retirement savings contribution rates, with over a third of workers increasing their contributions in 2023. Fidelity’s analysis, encompassing over 45 million IRA, 401(k), and 403(b) retirement accounts, paints a picture of a financially rewarding year for many Americans, aligning with the S&P 500 index’s 26.3% gain and the Dow Jones Industrial Average’s 13.7% increase.
Factors contributing to the escalating balances include 78% of 401(k) savers contributing enough to secure their employer’s full matching contribution. The average 401(k) savings rate for the fourth quarter, combining employee and employer match contributions, stood at approximately 14%. Nearly half of individuals voluntarily increased their contributions, and 25% of employers now offer auto-enrollment.
The demographic breakdown of 401(k) millionaires reveals an average savings tenure of 26 years, emphasizing the value of consistent, long-term contributions. The average age of a retirement account millionaire is 59. Those achieving millionaire status save, on average, 17.5% of their pay, with employers contributing an additional 9%, resulting in an impressive total savings rate of 26.6%.
While nearly half of Fidelity’s millionaires belong to the baby boomer generation, millennials represent a smaller fraction at 0.8%. The accomplishment of these millionaires underscores the significance of steady, sustained contributions over time.
Financial experts advise newly crowned millionaires to remain focused on their long-term strategy, avoiding undue concern over market fluctuations. For those nearing retirement, a nuanced investment strategy, including rebalancing portfolios and diversifying into short-term vehicles, is recommended to ensure financial security during the retirement years.
