Advice | More workers entered 401(k) millionaires club as stock market surged (2024)

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Advice | More workers entered 401(k) millionaires club as stock market surged? ›

A surge in the stock market has thrust more retirement investors into the millionaires club. Data released Tuesday by Fidelity Investments found that the number of employees with 401(k) balances over $1 million rose 41 percent in the fourth quarter of 2023 compared with the same period a year earlier.

The first quarter had 485,000 401(k)-created millionaires. That was a 15% increase from last quarter, when there were 422,000, and a 43% increase from a year ago's count of 340,000, Fidelity said. Of course, these millionaires didn't turn rich overnight.

Millionaire retirement accounts remain a rarity, making up about 2% of the roughly 24 million defined contribution plan accounts at Fidelity. These accounts holders, not surprisingly, tend to be older.

Key Takeaways

Always try to contribute at least enough to a 401(k) to qualify for any matching contributions from your employer. Be aware of the underlying costs and fees of the various investments within your retirement plan. You can contribute to both a personal IRA and a 401(k) plan at work, up to set annual limits.

The amount of retirement millionaires continues to grow, too: As of March 2024, the number of 401(k) accounts with balances of at least $1 million rose to 885,138, up nearly 12%, from year-end 2023, and nearly 30% year over year. The average account balance for this group was $1,137,409 as of March 2024.

Putting that much aside could make it easier to live your preferred lifestyle when you retire, without having to worry about running short of money. However, not a huge percentage of retirees end up having that much money. In fact, statistically, around 10% of retirees have $1 million or more in savings.

The average age of a retirement account millionaire is 59. "The key to saving for retirement is playing the long game and maintaining consistent contributions over time," Shamrell said.

The founding Johnson family, individually and through various trusts, owns stock representing a 49% voting interest in FMR, and have signed agreements pledging to vote all their shares as a bloc. Edward Johnson III was chairman of the group, but was replaced by his daughter, Abigail Johnson.

Fidelity's metrics come from an analysis of 23 million 401(k) participants. The average 401(k) balance in the first quarter was $125,900, up 16% from a year ago.

Is a 401k a waste of money? ›

Pro: 401(k)s can help you budget for retirement. Con: It can be difficult to access funds early. Pro: You'll save on taxes while working. Con: You might pay higher taxes later.

401(k) withdrawals after age 59½

Once you reach 59½, you can take distributions from your 401(k) plan without being subject to the 10% penalty. However, that doesn't mean there are no consequences. All withdrawals from your 401(k), even those taken after age 59½, are subject to ordinary income taxes.

Can you withdraw money from a 401(k) early? Yes, you can withdraw money from your 401(k) before age 59½. However, early withdrawals often come with hefty penalties and tax consequences. If you find yourself needing to tap into your retirement funds early, here are rules to be aware of and options to consider.

How long will $1 million in retirement savings last? In more than 20 U.S. states, a million-dollar nest egg can cover retirees' living expenses for at least 20 years, a new analysis shows. It's worth noting that most Americans are nowhere near having that much money socked away.

It's definitely possible, but there are several factors to consider—including cost of living, the taxes you'll owe on your withdrawals, and how you want to live in retirement—when thinking about how much money you'll need to retire in the future.

A $2 million nest egg can provide $80,000 of annual income when the principal gives a return of 4%. This estimate is on the conservative side, making $80,000 a solid benchmark for retirement income with this sum of money.

How much do people save for retirement? In 2022, about 46% of households reported any savings in retirement accounts. Twenty-six percent had saved more than $100,000, and 9% had more than $500,000. These percentages were only somewhat higher for older people.

Few investors max out their 401(k) contributions

In 2022, 15% of retirement plan participants saved the highest amount of $20,500 for that year, or $27,000 for those age 50 and older, according to Vanguard research.

In more than 20 U.S. states, a million-dollar nest egg can cover retirees' living expenses for at least 20 years, a new analysis shows. It's worth noting that most Americans are nowhere near having that much money socked away.