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New Data Reveals 401(k)s Are as Popular as Ever


Since they were first introduced 40 years ago, 401(k) plans have become one of the most popular ways for Americans to save for retirement. In fact, the term “401(k)” has practically become synonymous with retirement saving in America.

Average Balances Reach All-Time High

New research recently conducted by Fidelity Investments, one of the largest administrators of 401(k) plans in the country, reveals that 401(k) plans remain as popular as ever. In analyzing the 30 million retirement accounts across its retirement platform, Fidelity found that the average balance in 401(k) accounts has reached an all-time high of $106,500. This is up from $104,300 at the end of 2017.

The increase in average 401(k) balances is even more drastic when you go back a few years. For example, in 2008, the average balance in Fidelity 401(k) plans was just $56,900. The average balance in Fidelity 403(b) plans — which are similar to 401(k)s but are designed for teachers and non-profit employees — is also now at an all-time high of $85,500. This is up from $43,400 in 2008.

Meanwhile, the average balance in IRAs on Fidelity’s platform is $111,000, which is more than double the average balance of $52,000 in 2008.

Digger Deeper Into the Data

Fidelity broke 401(k) account balance data down further to allow for more in-depth analysis. For example:

  • The average balance among participants who have been contributing to their plan for five consecutive years is $221,200, up from $103,700 five years ago.
  • The average balance among participants who have been contributing to their plan for 10 consecutive years is $305,400, up from $65,700 10 years ago.
  • The average balance among participants who have been contributing to their plan for 15 consecutive years is $400,300, up from $47,800 15 years ago.

In addition, participants are now contributing 8.7 percent of pay to their 401(k) accounts, which is the highest contribution percentage since 2006. Women are contributing an average of 8.5 percent of pay to their 401(k) accounts, which is a record high.

More 401(k) Millionaires, Too

The research also reveals double-digit growth in the number of 401(k) millionaires. There are now 187,400 people with $1 million or more in their Fidelity 401(k), up from 133,000 401(k) millionaires a year ago. In 2008, there were only 19,300 participants with $1 million or more in their Fidelity 401(k). Additionally, there are 170,400 people with $1 million or more in their Fidelity IRA, which is up 25 percent from a year ago.

The number of 401(k) millionaires is still very small when compared to all Fidelity 401(k) participants — just 1.1 percent. But the nearly ten-fold growth in the number of 401(k) millionaires over the past decade says something about the resilience of many retirement savers in the aftermath of the financial crisis a decade ago.

“One of the few positive outcomes from the financial crisis was that it caused individuals to take a closer look at their retirement accounts and educate themselves on some of the steps they should take to help protect and grow their retirement savings,” stated a Fidelity spokesperson in the research. “We’ve seen an increasing amount of positive savings behavior over the last 10 years, which helped put many people back on track to reach their retirement goals.”

Annual Contribution Limits Going Up

It’s worth noting that in 2019, the 401(k) and 403(b) annual contribution limits will increase from $18,500 to $19,000. You can contribute an additional $6,000 to your 401(k) if you are age 50 or older, for a combined total of $25,000 in 2019.

Additionally, the annual contribution limit for IRAs will increase from $5,500 to $6,000 (or $7,000 if you’re age 50 or older) starting next year. This is the first time since 2013 that the annual IRA contribution limit has been increased.

This will present a golden opportunity to increase your retirement savings in the coming year. Whether you are on track with your retirement savings goals or have fallen a little bit behind, resolve now to stash away as much money as you can in your retirement account during the months and years remaining until your planned retirement date.

The commentary is limited to the dissemination of general information pertaining to Frontier Wealth Management, LLC’s (“Frontier”) investment advisory services. This information should not be used or construed as an offer to sell, a solicitation of an offer to buy or a recommendation for any security, market sector or investment strategy. There is no guarantee that the information supplied is accurate or complete. Frontier is not responsible for any errors or omissions, and provides no warranties with regards to the results obtained from the use of the information. Nothing in this document is intended to provide any legal, accounting or tax advice and Frontier does not provide such advice. This information is subject to change without notice and should not be construed as a recommendation or investment advice. You should consult an attorney, accountant or tax professional regarding your specific legal or tax situation.