The retirement savings of Americans are showing significant improvement, thanks to a combination of rising markets and consistent contributions to retirement accounts.
According to a recent report by Fidelity Investments, the average balance of a 401(k) account at the end of the second quarter was $112,400, representing a 4% increase from the first quarter and an 8.2% increase from the previous year. In addition, the average balance of an IRA account was $113,800, which saw a 5% increase from the first quarter and a 2.7% increase from the previous year.
Kevin Barry, the president of workplace investing at Fidelity Investments, expressed satisfaction with these positive gains for retirement savers. He attributed these improvements to the overall market growth and the commitment of both employees and employers towards securing a strong financial future.
While the previous year witnessed a challenging period for stocks and bonds, this year has seen a general increase in market performance, with the economy avoiding the predicted recession. The S&P 500 has risen by approximately 14% so far this year and the Nasdaq by about 28%.
In terms of savings rates, the total 401(k) savings rate for the second quarter was recorded as a commendable 13.9%. This rate encompasses both employee and employer contributions to 401(k) accounts. Fidelity suggests a savings rate of 15%, with baby boomers, who are currently in their peak earning years, leading with a savings rate of 16.6%.
Notably, boomers who have consistently made contributions to their 401(k) plans since 2008 now possess an average balance of nearly half a million dollars, as reported by Fidelity.
Furthermore, Fidelity observed a rise in account balances across all generations of Americans. This positive trend indicates an increased focus on long-term savings. The number of IRA accounts has also continued to grow, especially among young investors under the age of 35.
Fidelity Investments is the largest provider of retirement plans and IRAs in the United States. The company, based in Boston, currently has assets under administration amounting to $11.7 trillion as of June 30.