The fourth quarter ended with a recovery for retirement savers.
Retirement account balances have reached their highest levels in two years amid improving market conditions and steady savings rates, according to Fidelity Investments.
The average 401(k) account balance was $118,600 in the fourth quarter, up 14% from a year ago, Fidelity said. The average IRA balance was $116,600, up 12% from a year ago. The average 403(b) balance was $106,100, up 14% from a year ago.
“Last year ended on a high note for retirement savers,” said Sharon Brovelli, president of workplace investing at Fidelity Investments. “When it comes to issues like market stability and economic events, 2023 has given us the highest of highs and the lowest of lows, but, encouragingly, many pension savers have taken a long-term view and stayed the course Regardless, that’s the kind of commitment that can lead to a secure financial future.”
For Gen consistent in the long term. Gen X represents people born from 1965 to 1980.
The fourth quarter also saw an increase in the number of 401(k) millionaires, Fidelity said. The number of people with at least $1 million in their 401(k) increased to 422,000, up 20% from the third quarter of 2023, when the number of millionaires had declined due to market conditions. The fourth quarter also showed an increase of 11.5% compared to the second quarter of 2023.
“Americans love that millionaire title or the idea of a million dollars,” said Michael Shamrell, vice president of thought leadership at Fidelity’s workplace investing division. “401(k) millionaires demonstrate many positive attributes. The average tenure of millionaires is 26 years. This goes back to 1998. They saw the dot-com crash, 9/11, they saw the market go up and down, and they are examples of how to stay the course.
The savings rate for millionaire investors was 26.6%, and includes both personal investments and employer contributions, Shamrell explained.
“Of course, not everyone can save at these rates,” he said.
Overall, the total 401(k) savings rate remained stable at 13.9%, including employee and employer contributions, consistent with the second and third quarters of 2023 and up slightly from the rate of the fourth quarter of the previous year equal to 13.7%. .
And in 2023, 37% of workers increased their contribution rate for retirement savings, Fidelity said.
Because required minimum distributions do not take effect until age 73, under the provisions of the Secure 2.0 Act of 2022, most pre-retirees and retirees under age 70 have maintained a savings mindset and she did not withdraw from her 401(k) plans. Only 20% of retirees ages 70 to 72 have made 401(k) withdrawals. A total of 94% of retirees age 73 and older took 401(k) withdrawals in 2023.
Among Generation Z investors – those born from 1997 to 2012 – the number of Roth IRA accounts increased 50% in the fourth quarter of 2023, compared to the same period a year earlier. Roth IRAs provide after-tax contributions and tax-free withdrawals.
“We continue to see positive saving behaviors across the board for Gen Z. The numbers are really positive,” Shamrell said. “You have to keep an eye on them, being the oldest [Gen Z members] they are approaching their twenties, when they might be thinking about getting married and buying a house. We want to keep an eye on them to see if the positive saving behavior continues.”