Record Number of New “Million-Dollar” 401(k) Accounts Created in 2023, Yet Overall Number Remains Low
The number of new 401(k) account holders who joined the ranks of million-Dollar savers increased significantly in 2023. This increase can be attributed to robust market performances in both stocks and bonds throughout the year, along with consistent savings rates and employer-matched contributions.
According to recent data from Fidelity Investments, a leading provider of workplace retirement plans for over 23 million participants, the average 401(k) balance reached an all-time high of $118,600 by the end of Q4 2023. This marks a 14% increase compared to the previous year.
Among Gen Xers, those approaching retirement age over the next decade, Fidelity identified a notable trend: those with uninterrupted saving habits for at least 15 years boasted an average account balance exceeding $500,000.
Moreover, the number of 401(k) accounts with balances surpassing $1 million increased by 20% in Q4 alone and by 41% overall, reaching a total of 422,000. The average balance for this group came in at a substantial $1,551,300 during Q4 2023.
However, market performance was not the only factor influencing these impressive account balances. Savings discipline also played a crucial role. In fact, 27% of plan participants actively raised their contribution rates during the year, while an impressive 78% managed to contribute at a rate sufficient to secure their employer’s full matching contribution.
Combining both employee and employer contributions, the average savings rate for 2023 stood at 13.9%, representing a slight increase compared to 13.7% in 2022.
Sharon Brovelli, President of Workplace Investing at Fidelity Investments, expressed her optimism about the past year’s outcomes for retirement savers: “Despite the market volatility and economic uncertainties that characterized 2023, many retirement savers remained steadfast in their commitment to their long-term financial goals. This type of resilience and discipline can be instrumental in creating a secure financial future.”
Despite this positive news, it is essential to acknowledge that a substantial portion of the U.S. workforce has yet to reap these benefits. According to a report from the Bureau of Labor Statistics, although 73% of civilian workers had access to an employer-sponsored retirement plan in 2022, only 56% actually participated in them.
