MW 401(k) millionaires jump 27% as workers keep saving through bumpy markets

By Jessica Hall

Millionaires aren't made overnight: These have been investing for an average of 26 years

The number of 401(k) millionaires jumped 27% in 2024 as workers saved consistently and focused on long-term trends rather than reacting to short-term market moves, according to Fidelity Investments.

Over the course of the year, the number of 401(k) millionaires increased to 537,000, up from 422,000 in the prior year. That status wasn't achieved overnight: The 401(k) millionaires are on average 59 years old and have been investing in the same plan with the same employer for an average of 26 years, the investment firm said.

Baby boomers made up 41% of the 401(k) millionaires, while Generation X represented 57% and millennials 2%, Fidelity said. Baby boomers, who were born between 1946 and 1964, have been able to withdraw from their accounts without penalty since the age of 591/2, so their balances may be lower than before as they use the money to fund their retirement. Members of Gen X were born between 1965 and 1980, and millennials were born between 1981 and 1996.

Overall retirement-account balances dropped slightly in the fourth quarter amid softer market conditions, but savers still stuck to good habits such as high savings rates, Fidelity said. The Dow Jones Industrial Average DJIA showed a slight 0.9% return for the fourth quarter of 2024, while the S&P 500 SPX rose about 2%.

"There was a slight drop in the fourth quarter after enjoying several quarters of growth. The declines reflect the rockiness of the quarter in the market overall," said Michael Shamrell, vice president of workplace thought leadership at Fidelity. "The good thing is that savings behaviors remained consistent. Overall we're starting to see more and more people really understand the right steps to take - the long-term effort to put in and not reacting to short-term market conditions."

In the fourth quarter, the average 401(k) balance fell 0.5% to $131,700, and the median balance was $30,700. The average 403(b) balance was down 1%, to $117,800, and the median balance for those accounts was $28,600. For individual retirement accounts, the average balance dropped 1% to $127,534, and the median balance was $11,053.

Employers, meanwhile, are doing their part, Shamrell said, by offering features such as auto-enrollment in retirement plans for new employees and auto-escalation, whereby an employee's savings rate increases automatically each year.

The total average 401(k) savings rate increased to 14.1%, up slightly from 13.9% a year ago and close to Fidelity's suggested savings rate of 15%. The total rate includes an average 9.4% contribution from employees and a 4.7% contribution from employers.

Nearly 40% of retirement savers increased their contribution rate in 2024, with an average increase of 2.9%. Also, nearly 90% of savers overall received a contribution from their employer, Fidelity said.

The Fidelity report comes as there's increasing attention on how workers will fund their retirement without the pensions previous generations relied on. Meanwhile, the trust fund that backs Social Security is forecast to be depleted in 2033, which will mean benefits for current and future recipients will be slashed by 23% unless Congress acts to shore up the program.

The cost of healthcare also is a concern for retirees. A 65-year-old retiring in 2024 can expect to spend an average of $165,000 on healthcare and medical expenses during their retirement, according to a Fidelity report from last year.

Gen X savers are now setting their sights on retirement, Shamrell said, with 14.4% of that group making catch-up contributions. In 2025, people age 50 and over can add a catch-up contribution of $7,500 on top of the regular $23,500 contribution limit. Overall, only 8.6% of retirement savers max out their contributions, Fidelity said.

Gen X workers who have been in the same plan with the same employer for 15 years had average balances of $598,400, Fidelity said.

"That's a pretty solid foundation to build on," Shamrell said.

Still, 25% of Gen X members had an outstanding loan from their retirement accounts, higher than the average 18.8% loan rate for participants of all ages. Meanwhile, Generation Z - the cohort born between 1997 and 2012 - had the lowest loan rate, at 6.7%, Fidelity said.

Gen X is also part of the "sandwich generation" of people who are caring for both children and aging parents, which can be costly. Fidelity noted that participants who take out loans don't need to disclose their reason for doing so.

"The baton has been passed to Gen X, who surpassed baby boomers [in 401(k) balances] a few quarters ago," Shamrell said. "While [Gen X] was the first generation that didn't have a pension, they made other investments, like real estate or buying a home."

-Jessica Hall

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 27, 2025 00:01 ET (05:01 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.