401(k) Millionaires Hit Record High, and Millennials Join In

The number of 401(k) millionaires has reached a new high, with 654,000 savers now boasting at least $1 million in their workplace retirement accounts. This surge in millionaires can be attributed to the overall market gains that boosted account balances over the summer, as reported by Fidelity’s latest retirement analysis covering July, August, and September. This marks the sixth consecutive quarter of growth in the typical 401(k) balance, which now stands at an average of $144,400, a 5% increase from the previous quarter and a 9% jump from the same quarter last year.

One of the key contributors to this milestone is the high savings rates among workers. On average, workers are saving 9.5% of their pay, while employers are contributing an additional 4.7%, bringing the combined contributions to a record high of 14.2%. This savings rate is in line with Fidelity’s recommended total savings rate of 15%, which the company suggests is essential for maintaining one’s lifestyle in retirement.

Interestingly, millennials are beginning to join the ranks of 401(k) millionaires, representing about 4% of all 401(k) millionaires, up from 1.8% just a year ago. Gen Xers and baby boomers continue to dominate the demographic breakdown, accounting for approximately 60% and 36% of savers, respectively.

Moreover, Fidelity’s report revealed that women with 15 years of continuous investment in their 401(k) now have an average balance of $501,100, surpassing the $500,000 milestone for the first time. This represents a significant 16.5% increase from the previous year. Despite these positive developments, retirement confidence remains uneven, with only 6 in 10 women expressing confidence in their ability to retire comfortably, compared to 75% of men.

This confidence gap is mirrored in the disparity in retirement savings between men and women, with men typically having significantly higher 401(k) balances. This imbalance is largely attributed to the gender pay gap, which limits women’s lifetime earnings and their ability to contribute to retirement accounts.

In conclusion, the record number of 401(k) millionaires and the increasing average balances reflect the positive impact of market gains and high savings rates on retirement savings. However, efforts to address gender disparities in retirement savings and confidence are crucial to ensure financial security for all retirees.