The seven-figure club is growing fast as America adds millionaires to its ranks at a record pace. New data from Fidelity shows that the first quarter of 2024 saw great growth among two-comma 401(k) balances, and the latest crop of million-dollar nest-eggers proves that slow and steady wins the race — especially when the stock market is on a roll.
If you’ve been contributing to a retirement account consistently but haven’t checked in with your balance lately, you might want to take a look to see if you’re one of America’s newly minted 401(k) millionaires. If not, here’s how regular people are leveraging their retirement funds to grow gargantuan nest eggs — and how you can do it, too.
Wealthy people know the best money secrets. Learn how to copy them.
There’s Always Room for 1 More Millionaire
The Fidelity Q1 2024 Retirement Analysis examined the account balances and savings behaviors of more than 45 million 401(k), 403(b) and IRA retirement accounts.
It found that the first quarter of this year had 485,000 401(k) millionaires. That’s a 43% increase from 340,000 one year ago and a 15% increase from 422,000 in the previous quarter.
The average saver, however, still has a long way to go to join the club — but the numbers are moving in the right direction. Here’s a look at how average balances have changed by account type from last quarter and from 10 years ago.
- 401(k): $125,900 — Up 6% from Q4 2023 and up 42% from Q1 2014
- IRA: $127,745 — Up 10% from Q4 2023 and up 29% from Q1 2014
- 403(b): $113,000 — Up 7% from Q4 2023 and up 60% from Q1 2014
Each saver has a different story, but the study revealed that their successes were built on the same two ingredients — record-high contribution levels and a red-hot stock market.
A Good Year To Be Invested In the Stock Market
The Fidelity report attributed much of the strong savings numbers to “positive market conditions.”
In the last year, beginning in late May 2023, the S&P 500 — the benchmark stock market index representing the 500 largest American companies by market cap — delivered impressive returns of 28%. The tech-heavy Nasdaq did even better, with 34% gains over the same time.
But despite a strong stock market run putting wind in savers’ sails, it takes a whole lot more than one good year to turn average earners into millionaires.
Consistency and Time Are the Building Blocks of Wealth
Are you one of America’s newly minted 401(k) millionaires? If not, keep plugging away — time and consistent contributions are an unstoppable force of nature.
The study’s authors wrote, “Total average 401(k) savings rates reached a record high of 14.2%, driven by employee and employer 401(k) contributions that matched previous record levels (9.4% and 4.8%, respectively). This savings rate is the closest it has ever been to Fidelity’s suggested savings rate of 15% (this includes employee and employer contributions).”
But saving often trumps saving more.
The study found that “Long-term savers observed the greatest improvement.” The more than 4.9 million workers who have been in their 401(k) plans for five or more years have the best shot of joining tomorrow’s crop of millionaires — the strongest results came from those who contributed to the same account consistently over time.
How much time?
The average 401(k) millionaire was 26 years in the making, so if you’re not there yet, stick with it. Time and compounding remain the two most potent forces in wealth-building.