Record number of workers can call themselves 401(k) millionaires

Some super-savers in the Gen X generation — those born between 1965 and 1980 — are looking at eye-popping amounts in their 401(k) plans, the kind of money that comes awfully close to 401(k) balances for some super-saving baby boomers.

Granted, every Gen Xer isn't flush with retirement cash. We're talking about long-term savers who consistently set aside significant amounts of their paychecks in 401(k) plans for 15 years straight. These savers are individuals who have been in the same Fidelity-managed 401(k) plan, with the same employer, for an extended period of time, according to the latest research from Fidelity Investments released Thursday.

After all those years of saving, this group of Gen Xers is looking, on average, at more than a half million dollars.

Long-term, Gen X savers have average balances of $543,400 on their 401(k) statements, according to the retirement savings data for the first quarter from Fidelity Investments. The data doesn't reflect the entire 401(k) universe but is based on 401(k) plans managed by Fidelity, which is the largest 401(k) platform in the country.

Long-term baby boomer savers — those born between 1946 and 1964 — are looking at average balances of $543,200.

So, the Gen Xers are winning by an extra $200 over the baby boomers. It's the first time ever that Gen Xers in the long-term saver group beat the 15-year continuous balances for baby boomers.

Well, here's a key reality check: Many of those boomers are already retired, and they're spending their savings in retirement. And many Gen Xers are getting older and closer to retirement, so some Gen Xers are saving even more aggressively, said Michael Shamrell, Fidelity’s vice president of thought leadership for workplace investing.

Individuals 50 and over — the oldest Gen Xer turns 59 in 2024 — can contribute an extra $7,500 in 2024 to their 401(k) plans. That's on top of the maximum employee contribution of $23,000 into 401(k) plans for 2024.

The oldest boomers turn 78 this year and, typically, are well into their retirement. The baby boomer group will range from age 60 to 78 once they hit their birthdays in 2024.

Some baby boomers, Shamrell said, may still be working, and they're aggressively saving. But many baby boomers who are retired could be drawing down savings and spending their money in retirement. Some also might have shifted money from some 401(k) plans to other savings, including annuities outside of the plan, to provide a stream of income in retirement.

Many retirees in their 70s must withdraw at least some money from retirement savings to address complex required minimum distribution rules each year. The minimum amount required reflects one's age and retirement savings. And retirees can withdraw more than the minimum.

In 2020, the age benchmark for starting to take required minimum distributions moved to 72 from 70-and-a-half years old. The SECURE 2.0 Act later raised the age for required minimum distributions in general to 73 for those who turned 72 in 2023 and later. If you reach age 73 in 2024, the Internal Revenue Service notes, the required beginning date for your first RMD is April 1, 2025, for 2024. Also, Roth 401(k)s no longer have RMDs, starting this year.

Beginning in 2033, the RMD age will go up to 75.

Fidelity's research indicated that only 20% of retirees with money in a 401(k) made withdrawals in 2023. And, Fidelity noted, 94% of retirees age 73 and older who had money in a 401(k) made withdrawals in 2023.

A big stock rally gave a boost to 401(k) plans

The march toward Dow 40,000 — the Dow Jones Industrial Average reached its record close of 40,003.59 points on May 17 — clearly put many people on a better financial path.

Sure, we might be dealing with what many now call a "Vibecession" — where many feel pessimistic about the economy, higher prices, and yes, express anxiety about their own jobs and financial future.

In general, though, the job numbers and much of the 401(k) data say otherwise.

"The numbers, overall, we found very encouraging," Shamrell said.

He noted that total 401(k) savings rates reached a record high of 14.2%, which was driven by both employee and employer contributions.

The average 401(k) retirement account balance hit $125,900 in the first quarter of 2024, up 6% from the fourth quarter last year, based on Fidelity data. The average was up 16% from the first quarter a year ago.

The first-quarter data is based on 23,900 corporate defined contribution plans and 23.3 million participants in these Fidelity managed plans as of March 31.

Fidelity attributed the gains to record-high contribution levels and positive market conditions for investors overall. About 37% of those workers covered by Fidelity-managed 401(k) plans increased their retirement savings contribution rate in 2023.

What might be a sign of anxiety and financial stress: 17.8% of workers had a 401(k) loan in the first quarter of 2024, up from 16.7% in the first quarter a year ago. Even so, that's down from 19.9% in the first quarter of 2019.

While the 401(k) has plenty of critics — the New York Times podcast "The Daily" last week asked "Was the 401(k) a mistake?" — those who have aggressively saved aren't afraid to open their 401(k) statements lately.

For baby boomers, the average balance was $241,200 in Fidelity 401(k) plans.

For Gen X employees in Fidelity plans, the average balance was $178,500.

For millennials, those born between 1981 and 1996, the average balance was $59,800.

For Gen Z, those born between 1997 and 2012, the average balance was $11,300. Not all that bad for many who are just starting out in their careers. The oldest Gen Zers are 27.

We're still looking at far less than a million 401(k) millionaires

Only a tiny fraction of people can brag about a seven-figure 401(k). But it's a figure that's a talker when Fidelity releases these figures for its participants.

During the first quarter, 401(k)-created millionaires reached an all-time high at 485,000 savers, according to Fidelity. It's a 15% increase from the fourth quarter last year. And, even more startling, it's a 43% increase from a year ago.

Want a really odd stat? Let's go back a bit more than six years ago when about 150,000 people had $1 million or more in their 401(k) balances at Fidelity Investments as of the fourth quarter of 2017. It was a record number then, up from 93,000 people for the same time period in 2016.

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Typically, 401(k) savers reach millionaire status if they started saving early in their working years and kept consistently contributing as much as possible year after year after year. Many didn't panic and leave the market during an economic fallout. And typically, they're not frequently taking out loans from their 401(k) plan. It can help when you work somewhere with a generous employer match, too.

Many 401(k)-generated millionaires took action to set aside a greater percentage of their income toward retirement, as they kept working.

In the first quarter, for example, Fidelity noted that 401(k)-created millionaires have been saving in their plans for an average of 26 years, and they have an average contribution rate of 17%.

Many saw — and apparently survived — some pretty brutal times for the stock market during those 26 years — the implosion of the dot.com bubble in 2000, the stock market's plunge after the 9/11 terrorist attacks, the financial meltdown of 2008, and the turmoil on Wall Street in the early days of the COVID-19 pandemic in 2020.

But many consistently continued to save anyway, and they didn't try to time the market. "If people keep it up, they're going to keep themselves on the right path to reach their goals," Shamrell said.

Research shows that only 30% of small businesses offer a retirement savings benefit, Fidelity noted. But Shamrell said small businesses that offer retirement savings options do see strong participation. The average retirement balances at small businesses with Fidelity plans is $152,000.

How much employees have saved can vary by industry, as well, perhaps reflecting trends in how much workers are paid in that industry, matching contributions, and the age of the workforce. Again, these balances reflect companies in those industries that have their 401(k) with Fidelity. It's not the entire retail industry or entire automotive industry.

The average 401(k) balance in the automotive industry, according to Fidelity data, was $110,400.

The average balance in computer and electronic manufacturing was $204,500. The average balance in construction was $87,100.

In media and entertainment, the average balance was $124,300. In retail, the average balance was $51,200.

Shamrell said the industry data isn't designed to compare one industry to another. "The airlines don't necessarily want to know what the tech companies are doing," he said. "The airlines want to know what the other airlines are doing."

Corporate executives often want to know how others in their industry are encouraging retirement savings. They want to know the average contribution rate, for example, in their industry. Are they offering competitive benefits when it comes to a company's matching contributions for 401(k) plans?

Some industries, like retail, Shamrell said, tend to have lower 401(k) balances because a younger workforce tends to change jobs more frequently.

The 401(k) isn't a theoretical exercise, especially as millions of savers edged closer to retirement age.

Some 4.1 million Americans are expected to turn 65 in 2024, which is a record number. Many in this age group do not have traditional pensions and will be tapping into their savings.

Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on X (Twitter) @tompor.