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By Giulia Carbonaro
Senior Reporter
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A record number of Americans with a 401(k) retirement savings plan saved over $1 million at the end of the first quarter of the year, according to a recent update from Fidelity Investments.
The company, as first reported by Bloomberg, found that the number of 401(k) millionaires reached an unprecedented 485,000 between January and March. This was up 15 percent compared to the previous quarter, when it was 422,000, and 43 percent since March 2023.
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A spokesperson for Fidelity, one of the largest providers of workplace retirement plans, told the newspaper that the average balance for the 401(k) millionaires was $1,580,000, up from $1,551,300 between October and December 2023.
Newsweek contacted Fidelity for comment by email on Thursday morning.
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But how did the savers get to this sum? Fidelity says the average 401(k) participant who has now reached over $1 million in savings is someone who has been contributing to the plan for 26 years and paid 17 percent of their income into the program.
However, while big and long-term savers saw the biggest increases in their 401(k) balance, others are also profiting from favorable conditions in the market, Fidelity said. The average 401(k) balance jumped 16 percent compared to a year earlier to $125,900 by March, and the average savings rate reached a record 14.2 percent, including matches savers receive from their employer.
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"Record-high contribution levels coupled with positive market conditions pushed average account balances to their highest levels since the fourth quarter of 2021," a spokesperson for Fidelity said. "Long-term savers observed the greatest improvement, which is good news, especially for the more than 4.9 million workers that have been in their 401(k) plan for five years or more."
Despite the growing number of 401(k) participants with over $1 million in savings, these are still a minority among pensioners. Many Americans struggle to save any money for their retirement, while the majority isn't saving enough to comfortably exit the workforce.
The latest U.S. Federal Reserve's Survey of Consumer Finances, which looks at 2022 data, shows that roughly half of American households have a retirement account, and their median retirement savings is $86,900.
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The aging of the U.S. population is likely to pose an additional challenge to the country's retirees and its pension system. The number of Americans aged 65 and older is expected to more than double over the next 40 years, reaching 80 million in 2040, according to the Urban Institute. The number of Americans aged 85 and older would have nearly quadrupled between 2000 and 2040, the Washington-based think tank estimates.
A graying workforce is likely to prompt changes to the Social Security program, which over 71 million Americans rely on, as the ratio between retirees and workers might become unbearably unbalanced.
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