The year 2023 saw the creation of more 401(k) “millionaires,” though the overall number remains relatively low. Strong performances in stocks and bonds, coupled with steady savings rates and employer-provided matching contributions, led to positive financial outcomes for 401(k) investors. According to new fourth-quarter data from Fidelity Investments, the average 401(k) balance rose to $118,600 at the end of the year, marking a 14% increase from the previous year. Among Gen Xers who have been saving consistently for at least 15 years, the average 401(k) balance surpassed $500,000.
Fidelity Investments also reported an increase in the number of 401(k) accounts with balances exceeding $1 million, with a 20% rise in the fourth quarter and a 41% increase for the whole year. Market performance was not the sole driver of higher balances, as proactive savings habits also played a significant role. Approximately 27% of plan participants increased their contribution rate throughout the year, while 78% were contributing at a rate sufficient to receive their employer’s full matching contribution. The average savings rate in 2023 was 13.9%, slightly higher than the previous year’s 13.7%, reflecting a positive trend in retirement savings habits.
Sharon Brovelli, president of Workplace Investing at Fidelity Investments, highlighted the positive financial outlook for retirement savers in 2023. Despite market fluctuations, many savers demonstrated a commitment to long-term financial security by staying the course with their retirement plans. However, a significant portion of the working population in the U.S. still does not take full advantage of employer-sponsored retirement plans, according to data from the Bureau of Labor Statistics, indicating a need for greater awareness and participation in saving for retirement.