New York (CNN) – Overall, 401k plan members have had a good run over the past year. Especially those who have accumulated a balance of at least $1 million.
The number of so-called 401k millionaires hit a new record in the second quarter, according to a new data analysis released Wednesday by Fidelity Investments, which based its findings on 24 million 401k accounts from the 26,000 employer-sponsored plans it manages.
As of June 30, nearly half a million 401k accounts (497,000) had balances of $1 million or more, up 2.5% from the previous quarter. The median balance reached $1,595,200, up from $1,581,000 at the end of March, according to Fidelity data.
Of course, for the vast majority of people affiliated with a 401k retirement plan, the numbers were less striking and the trends a mix of good and bad news.
High stock market returns can't create a proper retirement nest egg unless someone saves and invests consistently throughout their career. The good news here is that Fidelity found that the median savings rate of participants was 14.2% of their income in the second quarter, the same as the previous quarter. That savings rate is just below the 15% typically recommended by retirement experts. And it reflects a combination of employee contributions (9.4%) plus employer contributions (4.8%).
The average 401k balance for all participants was $127,100, up 1% from the first quarter and 13% from the second quarter of 2023.
Overall averages, however, do not give a good indication of how a particular age group is faring.
Take Gen Xers, for example. The oldest members of that generation will reach full retirement age (67) in the next decade.
The good news for them: Those who have been saving in a 401k for at least 15 years saw their average balance reach $554,000, compared to $543,000 in the previous quarter.
The bad news: Among all Gen Xers with a 401k, regardless of how long they've been saving, the median balance was $182,100. And the median, which marks the point at which the middle of 401k balances are lowest, was just $55,500, according to Fidelity.
Fidelity's 401k data includes accounts from people who just joined a company and have access to a 401k for the first time or from people who changed jobs and rolled over their 401k savings into an IRA. So someone who built up tens or hundreds of thousands of dollars in savings at another job, where the 401k plan administrator wasn't Fidelity, and who just started putting money into a Fidelity-administered 401k at a new job could be pushing the averages down.
For example, Fidelity also has data on nearly 16 million IRA accounts, and found that Gen X contributions to IRAs increased by 30% over the past year.
But broadly speaking, especially for Gen Xers, and especially for the tens of millions of private sector workers who either don't have access to a 401k or can't afford to participate in a 401k plan, there is concern among policymakers that they won't have enough savings to maintain their standard of living in retirement, and will have to rely heavily on Social Security.
