Nearly 500,000 Americans are 401(k) millionaires

401(k) accounts in the millionaire club have an average balance of nearly $1.6 million
By Sam Bourgi
•
06 September 2024
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The number of 401(k) retirement balances worth at least $1 million has reached a new all-time high, according to new Fidelity data.

In the second quarter, there were 497,000 401(k) millionaires in the U.S., a 2.5% increase from the previous quarter and the third consecutive quarter of growth.

The average 401(k) balance in the millionaire club was $1,595,200, a slight increase from the previous quarter.

“Although increases were modest, retirement savers in the second quarter of 2024 benefited from the continued upswing of the previous quarter, when contribution levels and average account balances reached record highs,” said Fidelity’s president of workplace investing, Sharon Brovelli.

The report showed a healthy uptick in 401(k) balances for most retirement savers. By the end of June, the average 401(k) balance stood at $127,100, an increase of 20% since 2019 and a 39% jump over ten years.

The average savings rate for 401(k) account holders was 14.2%, which is just below the recommended 15%.

Although Americans are clearly saving more through their employer-sponsored plans, experts say the average worker still needs to pick up the pace for a stress-free retirement.

Savers are still well short of their ideal retirement

More than 100 million Americans are on 401(k)s and other so-called “defined contribution plans,” which collectively manage more than $10 trillion in assets.

Hefty stock market returns over the past year have padded their portfolio balances, but that doesn’t mean they’re on track to meet their savings goals.

As Creditnews reported, the typical American thinks they’ll need between $990,000 and $1.63 million to be able to retire comfortably.

Younger generations, such as Gen Zers, Millennials, and Gen Xers, are about $1.37 million shy of their lofty targets.

While these expectations may be inflated beyond what people actually need to scrape by, a rising cost of living has many Americans worried they won’t have enough when they retire.

According to CNBC, the typical retiree is on track to earn roughly $33,000 per year through a combination of personal savings, pension, and Social Security.

This represents a steep drop from the average annual salary of around $63,000.

While getting by on $33,000 is certainly possible, retirees will likely run into financial trouble unless they own their own home, have low expenses, and live in a more affordable part of the country.

Rising healthcare costs later in life are also a source of financial strain.

The other factor retirement savers need to consider is the impact of inflation on their future purchasing power, which has become more difficult to predict since the pandemic.

Personal finance experts like Amby Blackrock recommend overestimating inflation when setting retirement planning goals, as this will force people to increase their savings rates over time.

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