More than half a million 401(k) account holders now possess over a million dollars in savings.

More than half a million 401(k) account holders now possess over a million dollars in savings.

By the end of 2022, over 485,000 million-dollar-plus 401(k) accounts were recorded, representing a 15% increase from the 422,000 accounts at the end of 2023 and a staggering 43% jump year-on-year. Fidelity, a prominent provider of workplace retirement plans with more than 23 million participants, disclosed these statistics.

The average balance of these "401(k) millionaires" reached $1,580,000, surpassing the previous figure of $1,551,300 in the fourth quarter, according to a Fidelity representative.

There's no secret to amassing a 7-figure balance in a 401(k)—or any substantial balance for that matter. While market performance plays a crucial role, saving regularly over an extended period is even more critical. The typical 401(k) holder with over a million dollars saved has been putting money away for 26 years and contributes 17% of their income, which includes any matches offered by their employer.

Other 401(k) contributors saw significant improvements in their balances during the first quarter, as well. Fidelity noted, "Record-high contribution levels coupled with positive market conditions pushed average account balances to their highest levels since the fourth quarter of 2021." Specifically, the average balance increased by 16% to $125,900 from the previous year. At 14.2%, the average savings rate also surpassed its previously set record and is just shy of the recommended 15%.

Interestingly, Gen Xers—the cohort expected to retire next after the Baby Boomers—savings patterns resemble those of Baby Boomers. Those who have contributed consistently for 15 years have an average balance of $543,400.

Despite this promising trend, challenges remain. Some 17.8% of 401(k) participants borrowed against their savings and had the loan outstanding by the first quarter, unchanged from the fourth quarter but up from 16.7% a year ago. In the United States, retirement preparedness continues to affect millions of workers; both those without access to a workplace savings plan and those participating yet failing to contribute adequately. Federal Reserve data indicates nearly 50% of people have no money set aside for retirement.

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In the realm of successful business ventures, Fidelity's 401(k) account holders have witnessed significant success in their savings, with over 485,000 accounts surpassing the million-dollar mark by 2022. Utilizing a strategic blend of regular contributions over an extended period, market performance, and employer matches, many entrepreneurs in this 401(k) sphere have managed to build thriving business empires in their retirement savings.

Source: edition.cnn.com