401(K) Millionaires Surged 43% in the Past Year. Here’s How Long It Took Them to Reach $1 Million

The number of 401(k) millionaires increased by 43% from the previous year, driven by market gains and consistent contributions, according to Fidelity Investments. These millionaire accounts, however, did not achieve this status overnight. On average, it took 26 years of steady contributions to reach millionaire status.

‍

In the first quarter, there were 485,000 401(k)-created millionaires, a 15% rise from the previous quarter's 422,000, and a significant 43% increase from the 340,000 recorded a year ago. These accounts typically have an average contribution rate of 17%.

‍

The average balance for 401(k) accounts in the first quarter was $125,900, a 16% increase from the same period last year, while the median balance was $28,900. For 403(b) accounts, which are used by government and nonprofit workers, the average balance was $113,000, up 15% from a year earlier.

‍

Meanwhile, the average IRA balance reached $127,745, a 13% increase from the previous year. IRA accounts generally have higher balances than 401(k)s because individuals often consolidate multiple 401(k)s into an IRA. Fidelity's analysis included over 45 million IRA, 401(k), and 403(b) accounts.

‍

Sharon Brovelli, president of workplace investing at Fidelity, expressed optimism about the increase in account balances, indicating that retirement savers are maintaining their investments and contributions, reaping financial benefits as a result. This positive trend was partly attributed to the S&P 500 index rising 10.6% in the first quarter.

‍

Despite these gains, the average account balances are still below what many Americans believe they need for a comfortable retirement. According to Northwestern Mutual’s 2024 Planning & Progress Study, US adults estimate they will need $1.46 million to retire comfortably.

‍

The total average 401(k) savings rate reached a record high of 14.2% in the first quarter, approaching Fidelity’s recommended rate of 15%. Continuous savings also demonstrated significant benefits. Individuals who had been saving for 15 years saw a 7% increase in their account balances. For the first time, the 15-year continuous balance for Generation X participants ($543,400) surpassed that of baby boomers ($543,200).

‍

However, even with robust savings rates, many people continued to borrow from their 401(k) accounts. In the first quarter, 17.8% of workers had a 401(k) loan, consistent with the previous quarter but higher than the 16.7% from a year ago.

‍

Fidelity's report also highlighted the disparity in retirement plan offerings among small businesses. Only 30% of small businesses offer a retirement savings plan, yet those who do provide their employees with the opportunity to save show significant results. Small-business retirement plans had an average balance of $152,000 and an average contribution rate of 8%, which is higher than the traditional 401(k) deferral rate of 9.3%. These accounts included SEPs, Simple IRAs, and self-employed 401(k)s.

‍

Roger Stiles, president of Fidelity Wealth, emphasized the importance of small businesses in American communities and the positive impact of offering retirement plans to employees. He noted that providing a variety of retirement options for small businesses can help close retirement coverage gaps and encourage more Americans to save for retirement.

‍