The latest report shows that the United States has more 401(k) millionaires than ever before.
The number of "401(k) millionaires" - 401(k) plan participants with balances of at least $1 million - has reached a record high, as per new data from Fidelity Investments. Fidelity analyzed balances across 26,000 of its customers' accounts and found that as of June, there were approximately 497,000 retirement-created millionaires in the U.S. Additionally, nearly 399,000 Americans have at least $1 million in an individual retirement account.
Fidelity highlighted that starting early and consistently contributing to a retirement plan over many years are key factors in accumulating such substantial sums. Michael Shamrell, vice president of workplace thought leadership at Fidelity, mentioned that the average tenure for this group is 27 years, emphasizing their long-term approach to saving and staying on track.
According to Fidelity's research, Gen Xers, the generation closest to retirement, have increased their IRA contributions by 30% over the past year, marking the highest contributions in the last five years.
Despite the allure of the $1 million milestone, Shamrell pointed out that the amount needed for retirement savings varies significantly based on individual circumstances, including the location of residence.
While the number of 401(k) millionaires is on the rise, it is important to note that the majority of Americans are not adequately prepared for retirement. Fidelity's data shows that the average 401(k) balance is slightly over $127,000, which is a 13% increase from a year ago. A study by Northwestern Mutual revealed that the typical U.S. worker estimates needing savings of nearly $1.5 million to retire comfortably. At the same time, Prudential Financial data indicates that only 1 in 5 people aged 55 or older have $447,000 or more saved for retirement.
Teresa Ghilarducci, a renowned retirement expert and labor economist, highlighted the retirement gap between the rich and poor. She noted that individuals at the lower end typically have 12 years in retirement, while wealthier individuals enjoy around 20 years, underscoring the disparities in retirement readiness.
