The number of people with at least $1 million in their 401(k) accounts has seen a significant increase this year, growing by approximately 25%. According to Fidelity, the largest retirement-plan and individual retirement account provider in the United States, there were 378,000 retirement savers with seven-figure-plus balances in their Fidelity plans as of June 30, up from 299,000 at the end of 2022. Similarly, the number of IRA millionaires also experienced a similar percentage increase, reaching nearly 350,000 by June 30. These figures place savers with $1 million or more in their accounts in the top 1.64% of all Fidelity 401(k) accounts and the top 2.5% of IRA owners.

The rise and fall of retirement account millionaires closely follow the movements of the stock market. This year’s increase in retirement-account millionaires coincides with the S&P 500’s 16.71% surge since the beginning of the year, including dividends. In contrast, the Bloomberg U.S. Aggregate bond index has only increased by 0.31%. The previous year saw a decline in the number of Fidelity 401(k) millionaires due to the market downturn, resulting in a 32% decrease. While becoming a millionaire may not hold the same wealth status it once did due to inflation, it remains an aspirational target for many American workers when it comes to saving for retirement.

Number of 401(k) Millionaires Increases by 25% in 2022

The number of people with at least $1 million in their 401(k) accounts has grown by about 25% so far this year, according to Fidelity. As of June 30, some 378,000 retirement savers in Fidelity plans had balances of seven figures or more, compared to 299,000 at the end of 2021. The number of IRA millionaires also saw a similar percentage increase, reaching nearly 350,000 on June 30.

The increase in retirement account millionaires closely tracks the performance of the stock market. This year, the S&P 500 has seen a surge of 16.71%, including dividends, since January 1. On the other hand, the Bloomberg U.S. Aggregate bond index has only increased by 0.31%. In contrast, in 2021, both stocks and bonds experienced a decline, leading to a 32% decrease in the number of Fidelity 401(k) millionaires.

However, becoming a millionaire in retirement savings is no longer considered a significant wealth milestone due to inflation. Nonetheless, it remains an aspirational target for many American workers when it comes to saving for retirement. Mike Shamrell, vice president at Fidelity, acknowledges that $1 million may not be the perfect target, especially considering rising costs and the need for nest eggs to last for decades.

Despite the recent increase, the number of people with retirement account balances of at least $1 million has not yet returned to its peak, which occurred in the final months of 2021. At that time, Fidelity administered 442,000 401(k) accounts and 376,100 IRAs with seven-figure-plus balances. However, these numbers likely underestimate the true number of millionaires at Fidelity since the firm does not aggregate customers’ IRA and 401(k) balances or have knowledge of clients’ wealth held elsewhere.

One characteristic that distinguishes 401(k) millionaires is their high savings rates. On average, they save 17.2% of their pay, with employers contributing an additional 9.3% to their retirement accounts, resulting in a total savings rate of 26.5%. In comparison, baby boomers save an average of 11.5%, with employers contributing an extra 5.1%, leading to a total savings rate of 16.6%.

The average age of 401(k) millionaires is 59, indicating that they have achieved their milestone through consistent savings and not by relying on a single investment. As of June 30, the average 401(k) account held $112,400, an increase of 8.1% from the end of December. The average IRA balance was $113,800, up from $104,000.

Despite market volatility, many workers continue to save in their 401(k) accounts at relatively high rates. As of June 30, the average savings rate, including employer contributions, was 13.9% of pay, which is close to the 15% annual savings rate recommended by Fidelity.

In conclusion, the number of 401(k) millionaires has seen a significant increase in 2022, driven by the strong performance of the stock market. While $1 million may not hold the same level of significance due to inflation, it remains an important goal for many individuals when it comes to retirement savings. High savings rates and consistent contributions are key factors in achieving millionaire status in retirement accounts. Despite market volatility, workers continue to save at relatively high rates, which bodes well for their future financial security.

Takeaways:

• The number of 401(k) millionaires has grown by 25% in 2022.
• Stock market performance strongly influences the number of retirement account millionaires.
• $1 million is still an aspirational target for retirement savings, despite inflation.
• High savings rates and consistent contributions are key to achieving retirement account millionaire status.
• The average age of 401(k) millionaires is 59, indicating the importance of long-term savings strategies.