With the rising living costs, many U.S. workers sought safety in numbers – hard work that has been handsomely rewarded with membership to the retirement millionaires’ club. Fidelity reported that last year, retirement savers bumped up their contributions, resulting in significant gains in 401(k) accounts while creating a more prepared group of individuals upon retirement.
Fidelity data reports showed the highest level for average account balances in nearly two years and more than a third of workers of retirement savers increased their contribution rates in 2023. The investment firm reported that more than a third (37%) of U.S. workers increased their savings contribution rate last year. While consumers were squeezed by decades-high inflation, Sharon Brovelli, president of workplace investing at Fidelity, stated that “this past year ended on a high note for retirement savers.”
Fidelity’s fourth-quarter analysis of savings account balances is a data collection for more than 45 million IRA, 401(k), and 403(b) retirement accounts. This investment firm noted that the number of workers with sweet 401(k) accounts of $1 million or more jumped by 20% between the months of September to the end of December last year, stating that million-dollar retirement accounts grew by more than 11%. Fidelity’s data showed that, at the end of 2023, IRA millionaire accounts stood at 391,562, an impressive jump from 338,725 at the end of September.
About 1 in 4 employers offer auto-enrollment into retirement savings accounts, with a default contribution rate, an amount paid into your account should you not make your own selection, reaching record levels of 4.1%. Oftentimes, employers will match employee contributions up to a certain percentage. By the end of 2023, a staggering 78% of 401(k) savers contributed at a high enough rate to receive their employer’s matching percentage.
Brovelli stated that “when it comes to matters like market stability and economic events, 2023 gave us the highs of the highs, and the lows of the lows… but encouragingly, many retirement savers took the long view and stayed the course through it all, which is the type of commitment that can lead to a secure financial future.”
While the retirement number needed in your savings account depends on your individual needs, many experts argue that a little more than $1 million is needed for a comfortable retirement. While 2023 saw a growth of accounts reaping the benefits of additional contributions, a recent Clever study found that 46% of retirees have no plans if their savings run out, facing a potential retirement “crisis.” But at the end of the day, vice president of Fidelity’s workplace investing thought leadership, Michael Shamrell, stated that “regardless of what Fidelity guidelines are, you need to be at a point where you’re comfortable with your asset allocation, you’re comfortable with your contribution rate.”
But exactly who are these new retirement millionaires, and how did they reach new heights? These savers are workers who are going the distance to maximize their retirement saving contributions, saving at a higher rate, getting the max in employer matching contributions, and investing steadily over a long period.
Regardless of your saving game, it is essential to understand that the market never stays the same. Don’t ease up on the gas; be prepared to continuously make investment strategies to ensure your Golden years are golden.
