Yahoo Finance 3 Reasons for Record Number of 401(k) Millionaires — and How To Join Them
Despite challenging financial and economic conditions lately — namely inflation and soaring rates which have left little for savings — some Americans have been successful in beefing up their 401(k)s in the first quarter of 2024. In fact, they did so well that a small group of them have achieved 401(k) millionaire status, according to Fidelity.
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The numbers speak for themselves. This quarter includes an all-time high of 401(k)-created millionaires — a record 485,000, according to a Fidelity spokesperson who confirmed the data previously reported by several outlets.
According to the spokesperson, the average balance for these millionaires stood at $1.58 million, up from $1. 55 million in the fourth quarter of 2023.
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Starting Early
These individuals were able to reach this level of retirement savings through starting early and contributing as much as they could over many years, said Mike Shamrell, Vice President of Thought Leadership for Fidelity Investments.
“We wouldn’t say this is surprising, but gratifying to see that being able to make steady contributions over a sustained period of time can really have a positive impact,” Shamrell added.
Positive Market Conditions
Fidelity also noted that positive market conditions have also been a contributing factor.
The S&P 500 is up 14.5% year-to-date, while the Nasdaq is up 19.6% year-to-date, as of June 12.
These favorable market conditions have been in place since last quarter-as in the fourth quarter of 2023, there also was a 20% increase in 401(k) millionaires, reversing the previous downward trend, “when the number of millionaires dropped as a result of market conditions,” according to a previous Fidelity study.
This first quarter, the average 401(k) balance stood at $125,900 – a whopping 16% increase from the first quarter of 2023, and a 6% increase from the fourth quarter of 2023, according to Fidelity’s analysis.
In addition, overall, 401(k) savings rates reached a record high of 14.2%. Meanwhile, millennials saw their average 401(k) balance increase 11%, while it shot up 15% for Gen Zers, the data found.
Slow and Steady Wins the Race
Shamrell also noted that while positive market conditions certainly play a role, these individuals- who on average are 58.9 years old- have been in the same plan for an average of 26 years.
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“Additionally, they have an average contribution rate of 17%, which, when paired with an employer match, can really make a big impact on savings,” he added. “They have remained committed to their retirement savings and have maintained steady contributions through all of the market ups and downs.”
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This article originally appeared on GOBankingRates.com: 3 Reasons for Record Number of 401(k) Millionaires — and How To Join Them
