The Good News? If You Have a 401(k), You’re Doing Great

by Jason Unger

Wall Street

The research earlier this year that nearly 7 out of 10 Americans have less than $1,000 in savings is scary.

It’s legitimately frightening, as they have no place to turn to when unexpected expenses pop up (which always will).

While it’s crucial that those who don’t have savings begin to, there is some good news on the savings front.

According to new data from Fidelity Investments, the average 401(k) and IRA balances have reached a record high, reports Bloomberg.

The average 401(k) account balance stands at $97,700 as of June 30. That’s a 9.6 percent gain from the $89,100 average of a year ago, and a big leap from the $73,300 average of five years ago. Average IRA totals, meanwhile, rose to $100,200 from $89,600 a year ago and $73,100 in 2012. For the 12 months ending June 30, market gains accounted for 72 percent of the rise in retirement account balances at Fidelity. Over that same period, the Standard & Poor’s 500 had a total return of 17.9 percent.

Obviously, the dramatic increase in the stock market since the presidential election has helped those balances incredibly.

But it’s not just money in the market that’s growing, according to the data — a lot of new money is being invested in those retirement accounts. Over the past year, Fidelity reports that 401(k) participants invested an average of $5,850, a 4 percent increase year-over-year and an all-time record high.

(Remember, if you haven’t started your 401(k), you’re missing out on free money from your employer.)

Here’s a few more interesting tidbits from Fidelity’s data, as reported by Bloomberg.

  • 401(k) participants who have been in the same plan for 10 straight years have an average balance of $266,100; ten years ago, that average was only $78,800
  • Millennials participating in 401(k) plans are heavily invested in target-date funds; two-thirds of millennials are completely invested in the self-adjusting funds

Fidelity’s data encompasses more than 22,000 companies, with more than 15 million 401(k) and nearly 9 million IRA accounts.

Photo by Chris Li on Unsplash

{ 3 comments… read them below or add one }

Rodney Allen Hampton August 9, 2017 at 6:04 am

Insane that Millennials are putting their 401k on self-adjusting funds.

Jason Unger August 9, 2017 at 10:15 am

Rodney –

From a fee standpoint, I agree — millennials have the opportunity to keep their costs low by selecting cheap index funds and rebalancing once a year.

From a simplicity standpoint, knowing that they can essentially set-it-and-forget-it so their allocation automatically adjusts makes a lot of sense.

Rodney Allen Hampton August 14, 2017 at 5:03 am

The fees will definitely kill them. A simple quarterly rebalancing is allowed with most 401ks. Many have limits on how many shuffles you can do per year but quarterly seems to be fine.

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