Advice | More workers entered 401(k) millionaires club as stock market surged (2024)

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Advice | More workers entered 401(k) millionaires club as stock market surged? ›

A surge in the stock market has thrust more retirement investors into the millionaires club. Data released Tuesday by Fidelity Investments found that the number of employees with 401(k) balances over $1 million rose 41 percent in the fourth quarter of 2023 compared with the same period a year earlier.

Specifically, 485,000 of them. That's up 15% from the 422,000 accounts reported at the end of 2023 and 43% higher than a year ago.

Millionaire retirement accounts remain a rarity, making up about 2% of the roughly 24 million defined contribution plan accounts at Fidelity. These accounts holders, not surprisingly, tend to be older.

Among the millions of retirement savers who hold accounts at Fidelity, the median 401(k) balance was $28,900 as of the first quarter of 2024, according to data the brokerage provided. That number may skew a little low, since many investors have multiple, small accounts from past employers.

With a 401(k), you can make automatic contributions directly from your paycheck. It makes saving a simple and effortless process. And, since the deduction is taken before you get paid, you won't miss the money. When it does cross your mind, you should feel great that you're taking the right steps to secure your future!

According to the Federal Reserve's latest Survey of Consumer Finances, only about 10% of American retirees have managed to save $1 million or more. This leaves a significant 90% who fall short of this milestone.

Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate.

Fidelity Investments is owned by privately held FMR LLC, which is controlled by the Johnson family. The family, along with a small group of FMR employees and shareholders, are also investors in F-Prime Capital, the private venture capital arm.

What is the average retirement balance at Fidelity? ›

The financial services firm handles more than 45 million retirement accounts total. The average 401(k) balance ended 2023 up 14% from a year earlier to $118,600, Fidelity found. The average individual retirement account balance also gained 12% year over year to $116,600 in the fourth quarter of 2023.

The value of 401(k) plans is based on the concept of dollar-cost averaging, but that's not always a reliable theory. Many 401(k) plans are expensive because of high administrative and record-keeping costs. Nonetheless, 401(k) plans are ultimately worth it for most people, depending on your retirement goals.

So to answer the question, we believe having one to one-and-a-half times your income saved for retirement by age 35 is a reasonable target. By age 50, you would be considered on track if you have three-and-a-half to six times your preretirement gross income saved.

401(k) withdrawals after age 59½

Once you reach 59½, you can take distributions from your 401(k) plan without being subject to the 10% penalty. However, that doesn't mean there are no consequences. All withdrawals from your 401(k), even those taken after age 59½, are subject to ordinary income taxes.

The Disadvantages of a 403(b)

Since the plan functions as a retirement savings vehicle, you could face additional expenses if you take withdrawals early. "If you distribute funds from a 403(b) account before age 59 1/2 your funds may be subject to taxes and early withdrawal penalties," Comella says.

401(k) millionaires hit a record high in the first quarter of 2024. The millionaires average 26 years of investing, with a 17 percent contribution rate. Successful investors don't panic at market downturns and instead see them as buying opportunities.

How much do people save for retirement? In 2022, about 46% of households reported any savings in retirement accounts. Twenty-six percent had saved more than $100,000, and 9% had more than $500,000. These percentages were only somewhat higher for older people.

In 2022, 15% of retirement plan participants saved the highest amount of $20,500 for that year, or $27,000 for those age 50 and older, according to Vanguard research.

For example, 80% of millionaires in the study made at least a portion of their wealth by investing in their 401K.